Correlation Between CANEX Metals and Northern Superior

Can any of the company-specific risk be diversified away by investing in both CANEX Metals and Northern Superior 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 CANEX Metals and Northern Superior into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CANEX Metals and Northern Superior

-0.34

Correlation Coefficient

CANEX Metals  Northern Superior

Very good diversification

The 3 months correlation between CANEX and Northern is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CANEX Metals and Northern Superior Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Superior and CANEX Metals 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 CANEX Metals are associated (or correlated) with Northern Superior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Superior has no effect on the direction of CANEX Metals i.e., CANEX Metals and Northern Superior go up and down completely randomly.

Pair Corralation between CANEX Metals and Northern Superior

Assuming the 90 days trading horizon CANEX Metals is expected to generate 4.74 times more return on investment than Northern Superior. However, CANEX Metals is 4.74 times more volatile than Northern Superior Resources. It trades about 0.08 of its potential returns per unit of risk. Northern Superior Resources is currently generating about 0.06 per unit of risk. If you would invest  4.00  in CANEX Metals on December 23, 2024 and sell it today you would earn a total of  1.00  from holding CANEX Metals or generate 25.0% return on investment over 90 days.

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

CANEX Metals  vs.  Northern Superior Resources

CANEX Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CANEX Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CANEX Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Northern Superior

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Superior Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northern Superior may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CANEX Metals and Northern Superior

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

The idea behind CANEX Metals and Northern Superior 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.

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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.