Correlation Between Northern Star and Cosmo Metals

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

Diversification Opportunities for Northern Star and Cosmo Metals

-0.03

Correlation Coefficient

Northern Star  Cosmo Metals

Good diversification

The 3 months correlation between Northern and Cosmo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Cosmo Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmo Metals 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 Cosmo Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmo Metals has no effect on the direction of Northern Star i.e., Northern Star and Cosmo Metals go up and down completely randomly.

Pair Corralation between Northern Star and Cosmo Metals

Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.54 times more return on investment than Cosmo Metals. However, Northern Star Resources is 1.84 times less risky than Cosmo Metals. It trades about 0.4 of its potential returns per unit of risk. Cosmo Metals is currently generating about -0.33 per unit of risk. If you would invest  1,550  in Northern Star Resources on October 23, 2024 and sell it today you would earn a total of  149.00  from holding Northern Star Resources or generate 9.61% 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.  Cosmo Metals

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. In spite of comparatively stable basic indicators, Northern Star is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cosmo Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmo Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cosmo Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northern Star and Cosmo Metals

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

The idea behind Northern Star Resources and Cosmo Metals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.