Correlation Between Northern Star and Resolute Mining

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

Diversification Opportunities for Northern Star and Resolute Mining

0.05

Correlation Coefficient

Northern Star  Resolute Mining

Significant diversification

The 3 months correlation between Northern and Resolute is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Resolute Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resolute Mining 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 Resolute Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resolute Mining has no effect on the direction of Northern Star i.e., Northern Star and Resolute Mining go up and down completely randomly.

Pair Corralation between Northern Star and Resolute Mining

Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.4 times more return on investment than Resolute Mining. However, Northern Star Resources is 2.51 times less risky than Resolute Mining. It trades about 0.07 of its potential returns per unit of risk. Resolute Mining is currently generating about -0.14 per unit of risk. If you would invest  1,560  in Northern Star Resources on September 13, 2024 and sell it today you would earn a total of  133.00  from holding Northern Star Resources or generate 8.53% return on investment over 90 days.

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

Northern Star Resources  vs.  Resolute Mining

Northern Star Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Northern Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Resolute Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resolute Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Northern Star and Resolute Mining

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

The idea behind Northern Star Resources and Resolute Mining 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 Global Correlations module to find global opportunities by holding instruments from different markets.