Correlation Between Northern Star and Native Mineral
Can any of the company-specific risk be diversified away by investing in both Northern Star and Native Mineral 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 Native Mineral 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 Native Mineral Resources, you can compare the effects of market volatilities on Northern Star and Native Mineral 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 Native Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Native Mineral.
Diversification Opportunities for Northern Star and Native Mineral
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Native is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Native Mineral Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Native Mineral 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 Native Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Native Mineral Resources has no effect on the direction of Northern Star i.e., Northern Star and Native Mineral go up and down completely randomly.
Pair Corralation between Northern Star and Native Mineral
Assuming the 90 days trading horizon Northern Star is expected to generate 1.46 times less return on investment than Native Mineral. But when comparing it to its historical volatility, Northern Star Resources is 4.08 times less risky than Native Mineral. It trades about 0.1 of its potential returns per unit of risk. Native Mineral Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Native Mineral Resources on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Native Mineral Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Native Mineral Resources
Performance |
| Timeline |
| Northern Star Resources |
| Native Mineral Resources |
Northern Star and Native Mineral Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Native Mineral
The main advantage of trading using opposite Northern Star and Native Mineral positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Native Mineral 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 Native Mineral will offset losses from the drop in Native Mineral's long position.| Northern Star vs. Embark Education Group | Northern Star vs. Charter Hall Education | Northern Star vs. IDP Education | Northern Star vs. Skycity Entertainment Group |
| Native Mineral vs. Northern Star Resources | Native Mineral vs. Evolution Mining | Native Mineral vs. Bluescope Steel | Native Mineral 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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