Correlation Between Great Northern and Evolution Mining

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

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

Diversification Opportunities for Great Northern and Evolution Mining

-0.03

Correlation Coefficient

Great Northern  Evolution Mining

Good diversification

The 3 months correlation between Great and Evolution is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Great Northern Minerals and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and Great Northern 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 Great Northern Minerals are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Great Northern i.e., Great Northern and Evolution Mining go up and down completely randomly.

Pair Corralation between Great Northern and Evolution Mining

Assuming the 90 days trading horizon Great Northern Minerals is expected to generate 2.62 times more return on investment than Evolution Mining. However, Great Northern is 2.62 times more volatile than Evolution Mining. It trades about 0.07 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.14 per unit of risk. If you would invest  1.10  in Great Northern Minerals on September 29, 2024 and sell it today you would earn a total of  0.40  from holding Great Northern Minerals or generate 36.36% return on investment over 90 days.

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

Great Northern Minerals  vs.  Evolution Mining

Great Northern Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Evolution Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Great Northern and Evolution Mining

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

The idea behind Great Northern Minerals and Evolution Mining 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.