Correlation Between North Arrow and International Tower

Can any of the company-specific risk be diversified away by investing in both North Arrow and International Tower 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 North Arrow and International Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North Arrow Minerals and International Tower Hill, you can compare the effects of market volatilities on North Arrow and International Tower 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 North Arrow with a short position of International Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Arrow and International Tower.

Diversification Opportunities for North Arrow and International Tower

0.21

Correlation Coefficient

North Arrow  International Tower

Modest diversification

The 3 months correlation between North and International is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding North Arrow Minerals and International Tower Hill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Tower Hill and North Arrow 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 North Arrow Minerals are associated (or correlated) with International Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Tower Hill has no effect on the direction of North Arrow i.e., North Arrow and International Tower go up and down completely randomly.

Pair Corralation between North Arrow and International Tower

Assuming the 90 days horizon North Arrow Minerals is expected to generate 2.53 times more return on investment than International Tower. However, North Arrow is 2.53 times more volatile than International Tower Hill. It trades about 0.02 of its potential returns per unit of risk. International Tower Hill is currently generating about 0.02 per unit of risk. If you would invest  20.00  in North Arrow Minerals on September 5, 2024 and sell it today you would lose (6.00) from holding North Arrow Minerals or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

North Arrow Minerals  vs.  International Tower Hill

North Arrow Minerals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North Arrow Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, North Arrow showed solid returns over the last few months and may actually be approaching a breakup point.

International Tower Hill

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Tower Hill are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, International Tower is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with North Arrow and International Tower

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

The idea behind North Arrow Minerals and International Tower Hill 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.