Correlation Between Caravel Minerals and Northern Star

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

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

Diversification Opportunities for Caravel Minerals and Northern Star

-0.49

Correlation Coefficient

Caravel Minerals  Northern Star

Very good diversification

The 3 months correlation between Caravel and Northern is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Caravel Minerals 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 Caravel Minerals 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 Caravel Minerals 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 Caravel Minerals i.e., Caravel Minerals and Northern Star go up and down completely randomly.

Pair Corralation between Caravel Minerals and Northern Star

Assuming the 90 days trading horizon Caravel Minerals is expected to under-perform the Northern Star. In addition to that, Caravel Minerals is 1.82 times more volatile than Northern Star Resources. It trades about -0.09 of its total potential returns per unit of risk. Northern Star Resources is currently generating about -0.14 per unit of volatility. If you would invest  1,651  in Northern Star Resources on October 10, 2024 and sell it today you would lose (72.00) from holding Northern Star Resources or give up 4.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Caravel Minerals  vs.  Northern Star Resources

Caravel Minerals

Risk-Adjusted Performance

6 of 100

Modest

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

Northern Star Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Northern Star is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caravel Minerals and Northern Star

The main advantage of trading using opposite Caravel Minerals and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caravel Minerals 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.

The idea behind Caravel Minerals and Northern Star 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.