Correlation Between Northern Graphite and American Manganese

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

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

Diversification Opportunities for Northern Graphite and American Manganese

0.84

Correlation Coefficient

Northern Graphite  American Manganese

Very poor diversification

The 3 months correlation between Northern and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and American Manganese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Manganese 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 American Manganese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Manganese has no effect on the direction of Northern Graphite i.e., Northern Graphite and American Manganese go up and down completely randomly.

Pair Corralation between Northern Graphite and American Manganese

Assuming the 90 days horizon Northern Graphite is expected to generate 1.37 times more return on investment than American Manganese. However, Northern Graphite is 1.37 times more volatile than American Manganese. It trades about -0.04 of its potential returns per unit of risk. American Manganese is currently generating about -0.15 per unit of risk. If you would invest  9.70  in Northern Graphite on December 30, 2024 and sell it today you would lose (3.10) from holding Northern Graphite or give up 31.96% of portfolio value over 90 days.

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

Northern Graphite  vs.  American Manganese

Northern Graphite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

American Manganese

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Manganese has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Northern Graphite and American Manganese

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

The idea behind Northern Graphite and American Manganese 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..