Correlation Between Northern Star and Superior Resources

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

Diversification Opportunities for Northern Star and Superior Resources

-0.56

Correlation Coefficient

Northern Star  Superior Resources

Excellent diversification

The 3 months correlation between Northern and Superior is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Superior Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior 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 Superior Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Resources has no effect on the direction of Northern Star i.e., Northern Star and Superior Resources go up and down completely randomly.

Pair Corralation between Northern Star and Superior Resources

Assuming the 90 days trading horizon Northern Star Resources is expected to generate 0.32 times more return on investment than Superior Resources. However, Northern Star Resources is 3.09 times less risky than Superior Resources. It trades about 0.1 of its potential returns per unit of risk. Superior Resources is currently generating about -0.06 per unit of risk. If you would invest  1,504  in Northern Star Resources on September 12, 2024 and sell it today you would earn a total of  186.00  from holding Northern Star Resources or generate 12.37% return on investment over 90 days.

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

Northern Star Resources  vs.  Superior Resources

Northern Star Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 7 (%) 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.

Superior Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Resources 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 basic 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 Superior Resources

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

The idea behind Northern Star Resources and Superior 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.