Correlation Between Cyclone Metals and Northern Star
Can any of the company-specific risk be diversified away by investing in both Cyclone Metals 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 Cyclone Metals and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cyclone Metals Limited and Northern Star Resources, you can compare the effects of market volatilities on Cyclone Metals 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 Cyclone Metals with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cyclone Metals and Northern Star.
Diversification Opportunities for Cyclone Metals and Northern Star
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cyclone and Northern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cyclone Metals Limited 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 Cyclone 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 Cyclone Metals Limited 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 Cyclone Metals i.e., Cyclone Metals and Northern Star go up and down completely randomly.
Pair Corralation between Cyclone Metals and Northern Star
Assuming the 90 days trading horizon Cyclone Metals Limited is expected to generate 7.38 times more return on investment than Northern Star. However, Cyclone Metals is 7.38 times more volatile than Northern Star Resources. It trades about 0.08 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.06 per unit of risk. If you would invest 2.00 in Cyclone Metals Limited on September 19, 2024 and sell it today you would earn a total of 2.20 from holding Cyclone Metals Limited or generate 110.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cyclone Metals Limited vs. Northern Star Resources
Performance |
Timeline |
Cyclone Metals |
Northern Star Resources |
Cyclone Metals and Northern Star Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cyclone Metals and Northern Star
The main advantage of trading using opposite Cyclone Metals and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cyclone Metals 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.Cyclone Metals vs. Northern Star Resources | Cyclone Metals vs. Evolution Mining | Cyclone Metals vs. Bluescope Steel | Cyclone Metals vs. Sandfire Resources NL |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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