Correlation Between Northgold and Starbreeze

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

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

Diversification Opportunities for Northgold and Starbreeze

0.64

Correlation Coefficient

Northgold  Starbreeze

Poor diversification

The 3 months correlation between Northgold and Starbreeze is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northgold AB and Starbreeze AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbreeze AB and Northgold 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 Northgold AB are associated (or correlated) with Starbreeze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbreeze AB has no effect on the direction of Northgold i.e., Northgold and Starbreeze go up and down completely randomly.

Pair Corralation between Northgold and Starbreeze

Assuming the 90 days horizon Northgold AB is expected to under-perform the Starbreeze. But the stock apears to be less risky and, when comparing its historical volatility, Northgold AB is 1.13 times less risky than Starbreeze. The stock trades about -0.07 of its potential returns per unit of risk. The Starbreeze AB is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Starbreeze AB on September 24, 2024 and sell it today you would lose (10.00) from holding Starbreeze AB or give up 34.48% of portfolio value over 90 days.

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

Northgold AB  vs.  Starbreeze AB

Northgold AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northgold AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Starbreeze AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbreeze AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Northgold and Starbreeze

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

The idea behind Northgold AB and Starbreeze AB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.