Correlation Between Northern Graphite and Graphite One

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

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

Diversification Opportunities for Northern Graphite and Graphite One

-0.61

Correlation Coefficient

Northern Graphite  Graphite One

Excellent diversification

The 3 months correlation between Northern and Graphite is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One and Northern Graphite 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 Northern Graphite are associated (or correlated) with Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of Northern Graphite i.e., Northern Graphite and Graphite One go up and down completely randomly.

Pair Corralation between Northern Graphite and Graphite One

Assuming the 90 days horizon Northern Graphite is expected to generate 2.29 times more return on investment than Graphite One. However, Northern Graphite is 2.29 times more volatile than Graphite One. It trades about 0.19 of its potential returns per unit of risk. Graphite One is currently generating about 0.07 per unit of risk. If you would invest  13.00  in Northern Graphite on October 16, 2024 and sell it today you would earn a total of  4.00  from holding Northern Graphite or generate 30.77% return on investment over 90 days.

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

Northern Graphite  vs.  Graphite One

Northern Graphite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Graphite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northern Graphite showed solid returns over the last few months and may actually be approaching a breakup point.

Graphite One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphite One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Northern Graphite and Graphite One

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

The idea behind Northern Graphite and Graphite One 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.