Correlation Between Northern Star and ACDC Metals
Can any of the company-specific risk be diversified away by investing in both Northern Star and ACDC Metals 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 ACDC Metals 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 ACDC Metals, you can compare the effects of market volatilities on Northern Star and ACDC Metals 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 ACDC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and ACDC Metals.
Diversification Opportunities for Northern Star and ACDC Metals
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northern and ACDC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals 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 ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Northern Star i.e., Northern Star and ACDC Metals go up and down completely randomly.
Pair Corralation between Northern Star and ACDC Metals
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.4 times more return on investment than ACDC Metals. However, Northern Star Resources is 2.48 times less risky than ACDC Metals. It trades about 0.38 of its potential returns per unit of risk. ACDC Metals is currently generating about -0.11 per unit of risk. If you would invest 1,545 in Northern Star Resources on November 3, 2024 and sell it today you would earn a total of 185.00 from holding Northern Star Resources or generate 11.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. ACDC Metals
Performance |
| Timeline |
| Northern Star Resources |
| ACDC Metals |
Northern Star and ACDC Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and ACDC Metals
The main advantage of trading using opposite Northern Star and ACDC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, ACDC Metals 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 ACDC Metals will offset losses from the drop in ACDC Metals' long position.| Northern Star vs. Aurelia Metals | Northern Star vs. Meeka Metals Limited | Northern Star vs. Microequities Asset Management | Northern Star vs. Mayfield Childcare |
| ACDC Metals vs. Gold Road Resources | ACDC Metals vs. Hutchison Telecommunications | ACDC Metals vs. Auctus Alternative Investments | ACDC Metals vs. Nine Entertainment Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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