Correlation Between Northern Star and Patriot Battery
Can any of the company-specific risk be diversified away by investing in both Northern Star and Patriot Battery 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 Battery 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 Battery Metals, you can compare the effects of market volatilities on Northern Star and Patriot Battery 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 Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Patriot Battery.
Diversification Opportunities for Northern Star and Patriot Battery
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Patriot is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Northern Star i.e., Northern Star and Patriot Battery go up and down completely randomly.
Pair Corralation between Northern Star and Patriot Battery
Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.57 times more return on investment than Patriot Battery. However, Northern Star Resources is 1.77 times less risky than Patriot Battery. It trades about 0.0 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.42 per unit of risk. If you would invest 1,728 in Northern Star Resources on August 29, 2024 and sell it today you would lose (10.00) from holding Northern Star Resources or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Patriot Battery Metals
Performance |
| Timeline |
| Northern Star Resources |
| Patriot Battery Metals |
Northern Star and Patriot Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Patriot Battery
The main advantage of trading using opposite Northern Star and Patriot Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, Patriot Battery 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 Battery will offset losses from the drop in Patriot Battery's long position.| Northern Star vs. Australian Unity Office | Northern Star vs. Centuria Industrial Reit | Northern Star vs. Green Technology Metals | Northern Star vs. Computershare |
| Patriot Battery vs. Retail Food Group | Patriot Battery vs. Janison Education Group | Patriot Battery vs. Charter Hall Education | Patriot Battery vs. Australian Unity Office |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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