Correlation Between Sims and Northern Star
Can any of the company-specific risk be diversified away by investing in both Sims 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 Sims and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sims and Northern Star Resources, you can compare the effects of market volatilities on Sims 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 Sims with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sims and Northern Star.
Diversification Opportunities for Sims and Northern Star
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sims and Northern is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sims 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 Sims 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 Sims 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 Sims i.e., Sims and Northern Star go up and down completely randomly.
Pair Corralation between Sims and Northern Star
Assuming the 90 days trading horizon Sims is expected to generate 1.83 times more return on investment than Northern Star. However, Sims is 1.83 times more volatile than Northern Star Resources. It trades about 0.35 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.64 per unit of risk. If you would invest 1,189 in Sims on October 22, 2024 and sell it today you would earn a total of 148.00 from holding Sims or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sims vs. Northern Star Resources
Performance |
| Timeline |
| Sims |
| Northern Star Resources |
Sims and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sims and Northern Star
The main advantage of trading using opposite Sims and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims 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.| Sims vs. Advanced Braking Technology | Sims vs. Anteris Technologies | Sims vs. Genetic Technologies | Sims vs. Neurotech International |
| Northern Star vs. Step One Clothing | Northern Star vs. ACDC Metals | Northern Star vs. Black Rock Mining | Northern Star vs. Insignia Financial |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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