Correlation Between Northern Minerals and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Northern Minerals and Equinor ASA 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 Minerals and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Minerals Exploration and Equinor ASA ADR, you can compare the effects of market volatilities on Northern Minerals and Equinor ASA 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 Minerals with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Minerals and Equinor ASA.
Diversification Opportunities for Northern Minerals and Equinor ASA
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Northern and Equinor is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northern Minerals Exploration and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR and Northern Minerals 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 Minerals Exploration are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Northern Minerals i.e., Northern Minerals and Equinor ASA go up and down completely randomly.
Pair Corralation between Northern Minerals and Equinor ASA
Given the investment horizon of 90 days Northern Minerals Exploration is expected to generate 11.7 times more return on investment than Equinor ASA. However, Northern Minerals is 11.7 times more volatile than Equinor ASA ADR. It trades about 0.1 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.02 per unit of risk. If you would invest 7.00 in Northern Minerals Exploration on September 3, 2024 and sell it today you would earn a total of 11.00 from holding Northern Minerals Exploration or generate 157.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Minerals Exploration vs. Equinor ASA ADR
Performance |
| Timeline |
| Northern Minerals |
| Equinor ASA ADR |
Northern Minerals and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Minerals and Equinor ASA
The main advantage of trading using opposite Northern Minerals and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Minerals position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Northern Minerals vs. American Copper Development | Northern Minerals vs. Triple Flag Precious | Northern Minerals vs. Hecla Mining | Northern Minerals vs. Compania de Minas |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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