Correlation Between Northern Star and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Northern Star and Dow Jones 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 Star and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Star Resources and Dow Jones Industrial, you can compare the effects of market volatilities on Northern Star and Dow Jones 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 Star with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Dow Jones.
Diversification Opportunities for Northern Star and Dow Jones
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Dow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Northern Star 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 Star Resources are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Northern Star i.e., Northern Star and Dow Jones go up and down completely randomly.
Pair Corralation between Northern Star and Dow Jones
Assuming the 90 days horizon Northern Star Resources is expected to generate 3.12 times more return on investment than Dow Jones. However, Northern Star is 3.12 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 623.00 in Northern Star Resources on August 27, 2024 and sell it today you would earn a total of 471.00 from holding Northern Star Resources or generate 75.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
Northern Star Resources vs. Dow Jones Industrial
Performance |
| Timeline |
Northern Star and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Northern Star Resources
Pair trading matchups for Northern Star
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Northern Star and Dow Jones
The main advantage of trading using opposite Northern Star and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Northern Star vs. Franco Nevada | Northern Star vs. Agnico Eagle Mines | Northern Star vs. Superior Plus Corp | Northern Star vs. NMI Holdings |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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