Correlation Between SPTSX Dividend and Northern Superior

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

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

Diversification Opportunities for SPTSX Dividend and Northern Superior

0.03

Correlation Coefficient

SPTSX Dividend  Northern Superior

Significant diversification

The 3 months correlation between SPTSX and Northern is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Northern Superior Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Superior and SPTSX Dividend 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 SPTSX Dividend Aristocrats 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 SPTSX Dividend i.e., SPTSX Dividend and Northern Superior go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Northern Superior

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the Northern Superior. But the index apears to be less risky and, when comparing its historical volatility, SPTSX Dividend Aristocrats is 4.11 times less risky than Northern Superior. The index trades about -0.01 of its potential returns per unit of risk. The Northern Superior Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Northern Superior Resources on December 25, 2024 and sell it today you would earn a total of  6.00  from holding Northern Superior Resources or generate 12.5% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Northern Superior Resources

Pair Trading with SPTSX Dividend and Northern Superior

The main advantage of trading using opposite SPTSX Dividend and Northern Superior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend 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 SPTSX Dividend Aristocrats 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.