Correlation Between Northern Star and Laureate Education

Can any of the company-specific risk be diversified away by investing in both Northern Star and Laureate Education 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 Laureate Education 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 Laureate Education, you can compare the effects of market volatilities on Northern Star and Laureate Education 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 Laureate Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Laureate Education.

Diversification Opportunities for Northern Star and Laureate Education

0.0

Correlation Coefficient

Northern Star  Laureate Education

Pay attention - limited upside

The 3 months correlation between Northern and Laureate is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education 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 Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of Northern Star i.e., Northern Star and Laureate Education go up and down completely randomly.

Pair Corralation between Northern Star and Laureate Education

Assuming the 90 days horizon Northern Star Resources is expected to under-perform the Laureate Education. In addition to that, Northern Star is 1.5 times more volatile than Laureate Education. It trades about -0.36 of its total potential returns per unit of risk. Laureate Education is currently generating about -0.17 per unit of volatility. If you would invest  1,830  in Laureate Education on September 23, 2024 and sell it today you would lose (90.00) from holding Laureate Education or give up 4.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Northern Star Resources  vs.  Laureate Education

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.

Laureate Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laureate Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Star and Laureate Education

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

The idea behind Northern Star Resources and Laureate Education 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.