Correlation Between Northern Star and Catalyst Metals
Can any of the company-specific risk be diversified away by investing in both Northern Star and Catalyst 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 Catalyst 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 Catalyst Metals, you can compare the effects of market volatilities on Northern Star and Catalyst 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 Catalyst Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Catalyst Metals.
Diversification Opportunities for Northern Star and Catalyst Metals
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Catalyst is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Northern Star i.e., Northern Star and Catalyst Metals go up and down completely randomly.
Pair Corralation between Northern Star and Catalyst Metals
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.35 times more return on investment than Catalyst Metals. However, Northern Star Resources is 2.89 times less risky than Catalyst Metals. It trades about -0.05 of its potential returns per unit of risk. Catalyst Metals is currently generating about -0.11 per unit of risk. If you would invest 1,801 in Northern Star Resources on August 31, 2024 and sell it today you would lose (64.00) from holding Northern Star Resources or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Catalyst Metals
Performance |
| Timeline |
| Northern Star Resources |
| Catalyst Metals |
Northern Star and Catalyst Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Catalyst Metals
The main advantage of trading using opposite Northern Star and Catalyst Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Catalyst 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 Catalyst Metals will offset losses from the drop in Catalyst Metals' long position.| Northern Star vs. WiseTech Global Limited | Northern Star vs. Oneview Healthcare PLC | Northern Star vs. Land Homes Group | Northern Star vs. Healthco Healthcare and |
| Catalyst Metals vs. Northern Star Resources | Catalyst Metals vs. Evolution Mining | Catalyst Metals vs. Bluescope Steel | Catalyst Metals vs. De Grey Mining |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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