Correlation Between Resource Base and Northern Star
Can any of the company-specific risk be diversified away by investing in both Resource Base and Northern Star 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 Resource Base and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and Northern Star Resources, you can compare the effects of market volatilities on Resource Base and Northern Star 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 Resource Base with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and Northern Star.
Diversification Opportunities for Resource Base and Northern Star
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Resource and Northern is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and Resource Base 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 Resource Base are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Resource Base i.e., Resource Base and Northern Star go up and down completely randomly.
Pair Corralation between Resource Base and Northern Star
Assuming the 90 days trading horizon Resource Base is expected to generate 2.08 times more return on investment than Northern Star. However, Resource Base is 2.08 times more volatile than Northern Star Resources. It trades about 0.06 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.12 per unit of risk. If you would invest 3.40 in Resource Base on August 25, 2024 and sell it today you would earn a total of 0.30 from holding Resource Base or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Resource Base vs. Northern Star Resources
Performance |
| Timeline |
| Resource Base |
| Northern Star Resources |
Resource Base and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and Northern Star
The main advantage of trading using opposite Resource Base and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, Northern Star 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 Northern Star will offset losses from the drop in Northern Star's long position.| Resource Base vs. Northern Star Resources | Resource Base vs. Evolution Mining | Resource Base vs. Bluescope Steel | Resource Base vs. Sandfire Resources NL |
| Northern Star vs. Carlton Investments | Northern Star vs. Hutchison Telecommunications | Northern Star vs. BSP Financial Group | Northern Star vs. Air New Zealand |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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