Correlation Between Northern Star and Patriot Lithium
Can any of the company-specific risk be diversified away by investing in both Northern Star and Patriot Lithium 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 Patriot Lithium 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 Patriot Lithium, you can compare the effects of market volatilities on Northern Star and Patriot Lithium 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 Patriot Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Patriot Lithium.
Diversification Opportunities for Northern Star and Patriot Lithium
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Patriot is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Patriot Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Lithium 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 Patriot Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Lithium has no effect on the direction of Northern Star i.e., Northern Star and Patriot Lithium go up and down completely randomly.
Pair Corralation between Northern Star and Patriot Lithium
Assuming the 90 days trading horizon Northern Star Resources is expected to under-perform the Patriot Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Northern Star Resources is 1.72 times less risky than Patriot Lithium. The stock trades about -0.01 of its potential returns per unit of risk. The Patriot Lithium is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Patriot Lithium on September 1, 2024 and sell it today you would earn a total of 0.30 from holding Patriot Lithium or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northern Star Resources vs. Patriot Lithium
Performance |
| Timeline |
| Northern Star Resources |
| Patriot Lithium |
Northern Star and Patriot Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Patriot Lithium
The main advantage of trading using opposite Northern Star and Patriot Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Patriot Lithium 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 Patriot Lithium will offset losses from the drop in Patriot Lithium's 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 |
| Patriot Lithium vs. Macquarie Technology Group | Patriot Lithium vs. Iron Road | Patriot Lithium vs. Red Hill Iron | Patriot Lithium vs. Thorney Technologies |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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