Correlation Between Northern Graphite and Mundoro Capital

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

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

Diversification Opportunities for Northern Graphite and Mundoro Capital

-0.44

Correlation Coefficient

Northern Graphite  Mundoro Capital

Very good diversification

The 3 months correlation between Northern and Mundoro is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Mundoro Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundoro Capital 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 Mundoro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundoro Capital has no effect on the direction of Northern Graphite i.e., Northern Graphite and Mundoro Capital go up and down completely randomly.

Pair Corralation between Northern Graphite and Mundoro Capital

Assuming the 90 days horizon Northern Graphite is expected to generate 5.64 times more return on investment than Mundoro Capital. However, Northern Graphite is 5.64 times more volatile than Mundoro Capital. It trades about 0.14 of its potential returns per unit of risk. Mundoro Capital is currently generating about -0.06 per unit of risk. If you would invest  9.50  in Northern Graphite on October 9, 2024 and sell it today you would earn a total of  4.50  from holding Northern Graphite or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Northern Graphite  vs.  Mundoro Capital

Northern Graphite

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Graphite are ranked lower than 10 (%) 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.

Mundoro Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Northern Graphite and Mundoro Capital

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

The idea behind Northern Graphite and Mundoro Capital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.