Correlation Between Northern Star and Globe Metals
Can any of the company-specific risk be diversified away by investing in both Northern Star and Globe 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 Globe 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 Globe Metals Mining, you can compare the effects of market volatilities on Northern Star and Globe 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 Globe Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Globe Metals.
Diversification Opportunities for Northern Star and Globe Metals
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Globe is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Globe Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Metals Mining 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 Globe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Metals Mining has no effect on the direction of Northern Star i.e., Northern Star and Globe Metals go up and down completely randomly.
Pair Corralation between Northern Star and Globe Metals
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.38 times more return on investment than Globe Metals. However, Northern Star Resources is 2.67 times less risky than Globe Metals. It trades about 0.12 of its potential returns per unit of risk. Globe Metals Mining is currently generating about -0.09 per unit of risk. If you would invest 1,613 in Northern Star Resources on November 3, 2024 and sell it today you would earn a total of 117.00 from holding Northern Star Resources or generate 7.25% 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. Globe Metals Mining
Performance |
| Timeline |
| Northern Star Resources |
| Globe Metals Mining |
Northern Star and Globe Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Globe Metals
The main advantage of trading using opposite Northern Star and Globe Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Globe 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 Globe Metals will offset losses from the drop in Globe Metals' long position.| Northern Star vs. Aurelia Metals | Northern Star vs. Meeka Metals Limited | Northern Star vs. Microequities Asset Management | Northern Star vs. Mayfield Childcare |
| Globe Metals vs. Australian Strategic Materials | Globe Metals vs. High Tech Metals | Globe Metals vs. Genetic Technologies | Globe Metals vs. Technology One |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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