Correlation Between Black Iron and Northcliff Resources

Can any of the company-specific risk be diversified away by investing in both Black Iron and Northcliff Resources 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 Black Iron and Northcliff Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Black Iron and Northcliff Resources, you can compare the effects of market volatilities on Black Iron and Northcliff Resources 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 Black Iron with a short position of Northcliff Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Iron and Northcliff Resources.

Diversification Opportunities for Black Iron and Northcliff Resources

0.21

Correlation Coefficient

Black Iron  Northcliff Resources

Modest diversification

The 3 months correlation between Black and Northcliff is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Black Iron and Northcliff Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northcliff Resources and Black Iron 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 Black Iron are associated (or correlated) with Northcliff Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northcliff Resources has no effect on the direction of Black Iron i.e., Black Iron and Northcliff Resources go up and down completely randomly.

Pair Corralation between Black Iron and Northcliff Resources

Assuming the 90 days trading horizon Black Iron is expected to generate 1.13 times more return on investment than Northcliff Resources. However, Black Iron is 1.13 times more volatile than Northcliff Resources. It trades about 0.22 of its potential returns per unit of risk. Northcliff Resources is currently generating about 0.05 per unit of risk. If you would invest  4.00  in Black Iron on October 24, 2024 and sell it today you would earn a total of  15.00  from holding Black Iron or generate 375.0% return on investment over 90 days.

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

Black Iron  vs.  Northcliff Resources

Black Iron

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Black Iron are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Black Iron displayed solid returns over the last few months and may actually be approaching a breakup point.

Northcliff Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northcliff Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Northcliff Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Black Iron and Northcliff Resources

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

The idea behind Black Iron and Northcliff Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.