Correlation Between Northern Star and KAUFMAN ET

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

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

Diversification Opportunities for Northern Star and KAUFMAN ET

0.38

Correlation Coefficient

Northern Star  KAUFMAN ET

Weak diversification

The 3 months correlation between Northern and KAUFMAN is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD and Northern Star 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 Star Resources are associated (or correlated) with KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of Northern Star i.e., Northern Star and KAUFMAN ET go up and down completely randomly.

Pair Corralation between Northern Star and KAUFMAN ET

Assuming the 90 days horizon Northern Star Resources is expected to generate 1.3 times more return on investment than KAUFMAN ET. However, Northern Star is 1.3 times more volatile than KAUFMAN ET BROAD. It trades about 0.06 of its potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about 0.02 per unit of risk. If you would invest  826.00  in Northern Star Resources on September 21, 2024 and sell it today you would earn a total of  98.00  from holding Northern Star Resources or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.08%
Values	Daily Returns

Northern Star Resources  vs.  KAUFMAN ET BROAD

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

KAUFMAN ET BROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KAUFMAN ET BROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, KAUFMAN ET is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Northern Star and KAUFMAN ET

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

The idea behind Northern Star Resources and KAUFMAN ET BROAD 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.