Correlation Between Northern Star and Corella Resources

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

Diversification Opportunities for Northern Star and Corella Resources

-0.26

Correlation Coefficient

Northern Star  Corella Resources

Very good diversification

The 3 months correlation between Northern and Corella is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Corella Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corella Resources 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 Corella Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corella Resources has no effect on the direction of Northern Star i.e., Northern Star and Corella Resources go up and down completely randomly.

Pair Corralation between Northern Star and Corella Resources

Assuming the 90 days trading horizon Northern Star is expected to generate 3.86 times less return on investment than Corella Resources. But when comparing it to its historical volatility, Northern Star Resources is 12.29 times less risky than Corella Resources. It trades about 0.19 of its potential returns per unit of risk. Corella Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Corella Resources on December 24, 2024 and sell it today you would lose (0.10) from holding Corella Resources or give up 33.33% of portfolio value over 90 days.

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

Northern Star Resources  vs.  Corella Resources

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 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Northern Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

Corella Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Corella Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corella Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Star and Corella Resources

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

The idea behind Northern Star Resources and Corella 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.