Correlation Between Northern Graphite and Blue Moon

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

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

Diversification Opportunities for Northern Graphite and Blue Moon

0.01

Correlation Coefficient

Northern Graphite  Blue Moon

Significant diversification

The 3 months correlation between Northern and Blue is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Metals 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of Northern Graphite i.e., Northern Graphite and Blue Moon go up and down completely randomly.

Pair Corralation between Northern Graphite and Blue Moon

Assuming the 90 days horizon Northern Graphite is expected to generate 11.78 times less return on investment than Blue Moon. But when comparing it to its historical volatility, Northern Graphite is 1.44 times less risky than Blue Moon. It trades about 0.01 of its potential returns per unit of risk. Blue Moon Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.84  in Blue Moon Metals on October 4, 2024 and sell it today you would earn a total of  20.16  from holding Blue Moon Metals or generate 416.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Northern Graphite  vs.  Blue Moon Metals

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. Despite nearly weak technical indicators, Northern Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Blue Moon Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Graphite and Blue Moon

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

The idea behind Northern Graphite and Blue Moon Metals 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.