Correlation Between Northern Star and CARSALES

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

Diversification Opportunities for Northern Star and CARSALES

-0.02

Correlation Coefficient

Northern Star  CARSALES

Good diversification

The 3 months correlation between Northern and CARSALES is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Northern Star i.e., Northern Star and CARSALES go up and down completely randomly.

Pair Corralation between Northern Star and CARSALES

Assuming the 90 days horizon Northern Star Resources is expected to generate 1.02 times more return on investment than CARSALES. However, Northern Star is 1.02 times more volatile than CARSALESCOM. It trades about 0.15 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.12 per unit of risk. If you would invest  933.00  in Northern Star Resources on December 31, 2024 and sell it today you would earn a total of  159.00  from holding Northern Star Resources or generate 17.04% return on investment over 90 days.

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

Northern Star Resources  vs.  CARSALESCOM

Northern Star Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Northern Star reported solid returns over the last few months and may actually be approaching a breakup point.

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Northern Star and CARSALES

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

The idea behind Northern Star Resources and CARSALESCOM 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.