Correlation Between Northern Star and Brickworks
Can any of the company-specific risk be diversified away by investing in both Northern Star and Brickworks 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 Brickworks 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 Brickworks, you can compare the effects of market volatilities on Northern Star and Brickworks 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 Brickworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Brickworks.
Diversification Opportunities for Northern Star and Brickworks
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and Brickworks is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Brickworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickworks 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 Brickworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickworks has no effect on the direction of Northern Star i.e., Northern Star and Brickworks go up and down completely randomly.
Pair Corralation between Northern Star and Brickworks
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 1.62 times more return on investment than Brickworks. However, Northern Star is 1.62 times more volatile than Brickworks. It trades about 0.04 of its potential returns per unit of risk. Brickworks is currently generating about 0.02 per unit of risk. If you would invest 1,216 in Northern Star Resources on October 15, 2024 and sell it today you would earn a total of 441.00 from holding Northern Star Resources or generate 36.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Brickworks
Performance |
| Timeline |
| Northern Star Resources |
| Brickworks |
Northern Star and Brickworks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Brickworks
The main advantage of trading using opposite Northern Star and Brickworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Brickworks 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 Brickworks will offset losses from the drop in Brickworks' long position.| Northern Star vs. Ora Banda Mining | Northern Star vs. Mount Gibson Iron | Northern Star vs. Sayona Mining | Northern Star vs. Rand Mining |
| Brickworks vs. Beston Global Food | Brickworks vs. Thorney Technologies | Brickworks vs. Computershare | Brickworks vs. Pure Foods Tasmania |
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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