Correlation Between Northern Graphite and Tower Resources
Can any of the company-specific risk be diversified away by investing in both Northern Graphite and Tower 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 Tower 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 Tower Resources, you can compare the effects of market volatilities on Northern Graphite and Tower 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 Tower Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Graphite and Tower Resources.
Diversification Opportunities for Northern Graphite and Tower Resources
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Tower is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Tower Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower 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 Tower Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Resources has no effect on the direction of Northern Graphite i.e., Northern Graphite and Tower Resources go up and down completely randomly.
Pair Corralation between Northern Graphite and Tower Resources
Assuming the 90 days horizon Northern Graphite is expected to generate 2.29 times less return on investment than Tower Resources. In addition to that, Northern Graphite is 1.62 times more volatile than Tower Resources. It trades about 0.02 of its total potential returns per unit of risk. Tower Resources is currently generating about 0.06 per unit of volatility. If you would invest 6.72 in Tower Resources on September 3, 2024 and sell it today you would earn a total of 2.37 from holding Tower Resources or generate 35.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Graphite vs. Tower Resources
Performance |
| Timeline |
| Northern Graphite |
| Tower Resources |
Northern Graphite and Tower Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Graphite and Tower Resources
The main advantage of trading using opposite Northern Graphite and Tower Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Graphite position performs unexpectedly, Tower 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 Tower Resources will offset losses from the drop in Tower Resources' long position.| Northern Graphite vs. Focus Graphite | Northern Graphite vs. Mason Graphite | Northern Graphite vs. Graphite One | Northern Graphite vs. Syrah Resources Limited |
| Tower Resources vs. Sassy Resources | Tower Resources vs. Pan Global Resources | Tower Resources vs. Metals X Limited | Tower Resources vs. Nevada King Gold |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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