Correlation Between Northland Power and GRIFFIN MINING

Can any of the company-specific risk be diversified away by investing in both Northland Power and GRIFFIN MINING 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 Northland Power and GRIFFIN MINING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northland Power and GRIFFIN MINING LTD, you can compare the effects of market volatilities on Northland Power and GRIFFIN MINING 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 Northland Power with a short position of GRIFFIN MINING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and GRIFFIN MINING.

Diversification Opportunities for Northland Power and GRIFFIN MINING

0.19

Correlation Coefficient

Northland Power  GRIFFIN MINING

Average diversification

The 3 months correlation between Northland and GRIFFIN is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and GRIFFIN MINING LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIFFIN MINING LTD and Northland Power 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 Northland Power are associated (or correlated) with GRIFFIN MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIFFIN MINING LTD has no effect on the direction of Northland Power i.e., Northland Power and GRIFFIN MINING go up and down completely randomly.

Pair Corralation between Northland Power and GRIFFIN MINING

Assuming the 90 days horizon Northland Power is expected to generate 5.05 times less return on investment than GRIFFIN MINING. But when comparing it to its historical volatility, Northland Power is 1.01 times less risky than GRIFFIN MINING. It trades about 0.03 of its potential returns per unit of risk. GRIFFIN MINING LTD is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  174.00  in GRIFFIN MINING LTD on December 22, 2024 and sell it today you would earn a total of  42.00  from holding GRIFFIN MINING LTD or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Northland Power  vs.  GRIFFIN MINING LTD

Northland Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northland Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northland Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

GRIFFIN MINING LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GRIFFIN MINING LTD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GRIFFIN MINING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northland Power and GRIFFIN MINING

The main advantage of trading using opposite Northland Power and GRIFFIN MINING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, GRIFFIN MINING 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 GRIFFIN MINING will offset losses from the drop in GRIFFIN MINING's long position.

The idea behind Northland Power and GRIFFIN MINING LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.