Correlation Between Northern Graphite and Tower Resources

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

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

Diversification Opportunities for Northern Graphite and Tower Resources

0.48

Correlation Coefficient

Northern Graphite  Tower Resources

Very weak diversification

The 3 months correlation between Northern and Tower is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Northern Graphite and Tower Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Resources 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 Tower Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Resources has no effect on the direction of Northern Graphite i.e., Northern Graphite and Tower Resources go up and down completely randomly.

Pair Corralation between Northern Graphite and Tower Resources

Assuming the 90 days horizon Northern Graphite is expected to under-perform the Tower Resources. In addition to that, Northern Graphite is 1.77 times more volatile than Tower Resources. It trades about -0.06 of its total potential returns per unit of risk. Tower Resources is currently generating about 0.0 per unit of volatility. If you would invest  9.00  in Tower Resources on December 21, 2024 and sell it today you would lose (0.60) from holding Tower Resources or give up 6.67% of portfolio value over 90 days.

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

Northern Graphite  vs.  Tower Resources

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.

Tower Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Tower Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northern Graphite and Tower Resources

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

The idea behind Northern Graphite and Tower Resources 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.