Correlation Between Northern Star and American West
Can any of the company-specific risk be diversified away by investing in both Northern Star and American West 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 American West 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 American West Metals, you can compare the effects of market volatilities on Northern Star and American West 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 American West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and American West.
Diversification Opportunities for Northern Star and American West
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Northern and American is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and American West Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American West 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 American West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American West Metals has no effect on the direction of Northern Star i.e., Northern Star and American West go up and down completely randomly.
Pair Corralation between Northern Star and American West
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.33 times more return on investment than American West. However, Northern Star Resources is 3.06 times less risky than American West. It trades about 0.09 of its potential returns per unit of risk. American West Metals is currently generating about 0.0 per unit of risk. If you would invest 1,176 in Northern Star Resources on August 25, 2024 and sell it today you would earn a total of 614.00 from holding Northern Star Resources or generate 52.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. American West Metals
Performance |
| Timeline |
| Northern Star Resources |
| American West Metals |
Northern Star and American West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and American West
The main advantage of trading using opposite Northern Star and American West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, American West 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 American West will offset losses from the drop in American West's long position.| Northern Star vs. Carlton Investments | Northern Star vs. Hutchison Telecommunications | Northern Star vs. BSP Financial Group | Northern Star vs. Air New Zealand |
| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Sandfire Resources NL |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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