Correlation Between North Arrow and Morien Resources

Can any of the company-specific risk be diversified away by investing in both North Arrow and Morien Resources 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 Morien Resources 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 Morien Resources Corp, you can compare the effects of market volatilities on North Arrow and Morien Resources 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 Morien Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Arrow and Morien Resources.

Diversification Opportunities for North Arrow and Morien Resources

-0.3

Correlation Coefficient

North Arrow  Morien Resources

Very good diversification

The 3 months correlation between North and Morien is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding North Arrow Minerals and Morien Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morien Resources Corp 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 Morien Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morien Resources Corp has no effect on the direction of North Arrow i.e., North Arrow and Morien Resources go up and down completely randomly.

Pair Corralation between North Arrow and Morien Resources

Assuming the 90 days horizon North Arrow Minerals is expected to under-perform the Morien Resources. But the stock apears to be less risky and, when comparing its historical volatility, North Arrow Minerals is 1.03 times less risky than Morien Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Morien Resources Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Morien Resources Corp on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Morien Resources Corp or generate 12.5% return on investment over 90 days.

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

North Arrow Minerals  vs.  Morien Resources Corp

North Arrow Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Arrow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, North Arrow is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Morien Resources Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morien Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Morien Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Arrow and Morien Resources

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

The idea behind North Arrow Minerals and Morien Resources Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.