Correlation Between Northern Star and Carawine Resources
Can any of the company-specific risk be diversified away by investing in both Northern Star and Carawine Resources 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 Carawine Resources 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 Carawine Resources Limited, you can compare the effects of market volatilities on Northern Star and Carawine Resources 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 Carawine Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Carawine Resources.
Diversification Opportunities for Northern Star and Carawine Resources
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Carawine is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Northern Star i.e., Northern Star and Carawine Resources go up and down completely randomly.
Pair Corralation between Northern Star and Carawine Resources
Assuming the 90 days trading horizon Northern Star Resources is expected to under-perform the Carawine Resources. But the stock apears to be less risky and, when comparing its historical volatility, Northern Star Resources is 1.91 times less risky than Carawine Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Carawine Resources Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 9.40 in Carawine Resources Limited on September 1, 2024 and sell it today you would earn a total of 1.60 from holding Carawine Resources Limited or generate 17.02% 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. Carawine Resources Limited
Performance |
| Timeline |
| Northern Star Resources |
| Carawine Resources |
Northern Star and Carawine Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Carawine Resources
The main advantage of trading using opposite Northern Star and Carawine Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Carawine Resources 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 Carawine Resources will offset losses from the drop in Carawine Resources' long position.| Northern Star vs. ARN Media Limited | Northern Star vs. EMvision Medical Devices | Northern Star vs. Talisman Mining | Northern Star vs. Qbe Insurance Group |
| Carawine Resources vs. Northern Star Resources | Carawine Resources vs. Evolution Mining | Carawine Resources vs. Bluescope Steel | Carawine Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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