Correlation Between Northern Star and Centrex Metals
Can any of the company-specific risk be diversified away by investing in both Northern Star and Centrex 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 Centrex 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 Centrex Metals, you can compare the effects of market volatilities on Northern Star and Centrex 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 Centrex Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Centrex Metals.
Diversification Opportunities for Northern Star and Centrex Metals
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and Centrex is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Centrex Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrex 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 Centrex Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrex Metals has no effect on the direction of Northern Star i.e., Northern Star and Centrex Metals go up and down completely randomly.
Pair Corralation between Northern Star and Centrex Metals
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.46 times more return on investment than Centrex Metals. However, Northern Star Resources is 2.15 times less risky than Centrex Metals. It trades about 0.02 of its potential returns per unit of risk. Centrex Metals is currently generating about -0.23 per unit of risk. If you would invest 1,651 in Northern Star Resources on October 15, 2024 and sell it today you would earn a total of 27.00 from holding Northern Star Resources or generate 1.64% 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. Centrex Metals
Performance |
| Timeline |
| Northern Star Resources |
| Centrex Metals |
Northern Star and Centrex Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Centrex Metals
The main advantage of trading using opposite Northern Star and Centrex Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Centrex 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 Centrex Metals will offset losses from the drop in Centrex Metals' long position.| Northern Star vs. Ora Banda Mining | Northern Star vs. Mount Gibson Iron | Northern Star vs. Sayona Mining | Northern Star vs. Rand Mining |
| Centrex Metals vs. Retail Food Group | Centrex Metals vs. Garda Diversified Ppty | Centrex Metals vs. Dalaroo Metals | Centrex Metals vs. Djerriwarrh Investments |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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