Correlation Between NTG Nordic and Northern Star

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

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

Diversification Opportunities for NTG Nordic and Northern Star

0.67

Correlation Coefficient

NTG Nordic  Northern Star

Poor diversification

The 3 months correlation between NTG and Northern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of NTG Nordic i.e., NTG Nordic and Northern Star go up and down completely randomly.

Pair Corralation between NTG Nordic and Northern Star

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Northern Star. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.49 times less risky than Northern Star. The stock trades about -0.08 of its potential returns per unit of risk. The Northern Star Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  977.00  in Northern Star Resources on October 10, 2024 and sell it today you would lose (29.00) from holding Northern Star Resources or give up 2.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

NTG Nordic Transport  vs.  Northern Star Resources

NTG Nordic Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Northern Star Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NTG Nordic and Northern Star

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

The idea behind NTG Nordic Transport and Northern Star 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.