Correlation Between SIERRA METALS and Northern Data

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Can any of the company-specific risk be diversified away by investing in both SIERRA METALS and Northern Data 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 SIERRA METALS and Northern Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIERRA METALS and Northern Data AG, you can compare the effects of market volatilities on SIERRA METALS and Northern Data 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 SIERRA METALS with a short position of Northern Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIERRA METALS and Northern Data.

Diversification Opportunities for SIERRA METALS and Northern Data

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between SIERRA and Northern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and Northern Data AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Data AG and SIERRA 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 SIERRA METALS are associated (or correlated) with Northern Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Data AG has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and Northern Data go up and down completely randomly.

Pair Corralation between SIERRA METALS and Northern Data

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 0.69 times more return on investment than Northern Data. However, SIERRA METALS is 1.44 times less risky than Northern Data. It trades about -0.02 of its potential returns per unit of risk. Northern Data AG is currently generating about -0.19 per unit of risk. If you would invest  55.00  in SIERRA METALS on December 22, 2024 and sell it today you would lose (3.00) from holding SIERRA METALS or give up 5.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SIERRA METALS  vs.  Northern Data AG

 Performance 
       Timeline  
SIERRA METALS 

Risk-Adjusted Performance

Very Weak

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

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Northern Data AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SIERRA METALS and Northern Data Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SIERRA METALS and Northern Data

The main advantage of trading using opposite SIERRA METALS and Northern Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIERRA METALS position performs unexpectedly, Northern Data 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 Data will offset losses from the drop in Northern Data's long position.
The idea behind SIERRA METALS and Northern Data AG 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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