Correlation Between WA1 Resources and Northern Star
Can any of the company-specific risk be diversified away by investing in both WA1 Resources 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 WA1 Resources and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WA1 Resources and Northern Star Resources, you can compare the effects of market volatilities on WA1 Resources 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 WA1 Resources with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of WA1 Resources and Northern Star.
Diversification Opportunities for WA1 Resources and Northern Star
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WA1 and Northern is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding WA1 Resources 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 WA1 Resources 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 WA1 Resources 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 WA1 Resources i.e., WA1 Resources and Northern Star go up and down completely randomly.
Pair Corralation between WA1 Resources and Northern Star
Assuming the 90 days trading horizon WA1 Resources is expected to generate 2.62 times more return on investment than Northern Star. However, WA1 Resources is 2.62 times more volatile than Northern Star Resources. It trades about 0.09 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.09 per unit of risk. If you would invest 557.00 in WA1 Resources on August 26, 2024 and sell it today you would earn a total of 1,024 from holding WA1 Resources or generate 183.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
WA1 Resources vs. Northern Star Resources
Performance |
| Timeline |
| WA1 Resources |
| Northern Star Resources |
WA1 Resources and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WA1 Resources and Northern Star
The main advantage of trading using opposite WA1 Resources and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WA1 Resources 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.| WA1 Resources vs. Northern Star Resources | WA1 Resources vs. Evolution Mining | WA1 Resources vs. Bluescope Steel | WA1 Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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