Correlation Between Metal Sky and Northern Star

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

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

Diversification Opportunities for Metal Sky and Northern Star

-0.38

Correlation Coefficient

Metal Sky  Northern Star

Very good diversification

The 3 months correlation between Metal and Northern is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star and Northern Star Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Investment and Metal Sky 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 Metal Sky Star 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 Investment has no effect on the direction of Metal Sky i.e., Metal Sky and Northern Star go up and down completely randomly.

Pair Corralation between Metal Sky and Northern Star

If you would invest  6.39  in Metal Sky Star on October 12, 2024 and sell it today you would lose (1.38) from holding Metal Sky Star or give up 21.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.45%
Values	Daily Returns

Metal Sky Star  vs.  Northern Star Investment

Metal Sky Star

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Metal Sky Star has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Northern Star Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Northern Star is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Metal Sky and Northern Star

The main advantage of trading using opposite Metal Sky and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metal Sky 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 Metal Sky Star and Northern Star Investment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..