Correlation Between Northern Graphite and Rockridge Resources
Can any of the company-specific risk be diversified away by investing in both Northern Graphite and Rockridge Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Northern Graphite and Rockridge Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Graphite and Rockridge Resources, you can compare the effects of market volatilities on Northern Graphite and Rockridge Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Northern Graphite with a short position of Rockridge Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Graphite and Rockridge Resources.
Diversification Opportunities for Northern Graphite and Rockridge Resources
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Rockridge is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Rockridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockridge Resources and Northern Graphite is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Northern Graphite are associated (or correlated) with Rockridge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockridge Resources has no effect on the direction of Northern Graphite i.e., Northern Graphite and Rockridge Resources go up and down completely randomly.
Pair Corralation between Northern Graphite and Rockridge Resources
Assuming the 90 days horizon Northern Graphite is expected to generate 1.49 times more return on investment than Rockridge Resources. However, Northern Graphite is 1.49 times more volatile than Rockridge Resources. It trades about 0.02 of its potential returns per unit of risk. Rockridge Resources is currently generating about -0.09 per unit of risk. If you would invest 6.60 in Northern Graphite on September 1, 2024 and sell it today you would lose (0.80) from holding Northern Graphite or give up 12.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern Graphite vs. Rockridge Resources
Performance |
| Timeline |
| Northern Graphite |
| Rockridge Resources |
Northern Graphite and Rockridge Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Graphite and Rockridge Resources
The main advantage of trading using opposite Northern Graphite and Rockridge Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Graphite position performs unexpectedly, Rockridge Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rockridge Resources will offset losses from the drop in Rockridge Resources' long position.| Northern Graphite vs. South32 Limited | Northern Graphite vs. NioCorp Developments Ltd | Northern Graphite vs. HUMANA INC | Northern Graphite vs. SCOR PK |
| Rockridge Resources vs. Liontown Resources Limited | Rockridge Resources vs. ATT Inc | Rockridge Resources vs. Merck Company | Rockridge Resources vs. Walt Disney |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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