Correlation Between Penta Ocean and Northern Star

Can any of the company-specific risk be diversified away by investing in both Penta Ocean and Northern Star 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 Penta Ocean and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penta Ocean Construction Co and Northern Star Resources, you can compare the effects of market volatilities on Penta Ocean and Northern Star 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 Penta Ocean with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Northern Star.

Diversification Opportunities for Penta Ocean and Northern Star

0.51

Correlation Coefficient

Penta Ocean  Northern Star

Very weak diversification

The 3 months correlation between Penta and Northern is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Penta Ocean i.e., Penta Ocean and Northern Star go up and down completely randomly.

Pair Corralation between Penta Ocean and Northern Star

Assuming the 90 days horizon Penta Ocean is expected to generate 1.16 times less return on investment than Northern Star. In addition to that, Penta Ocean is 1.16 times more volatile than Northern Star Resources. It trades about 0.11 of its total potential returns per unit of risk. Northern Star Resources is currently generating about 0.15 per unit of volatility. If you would invest  903.00  in Northern Star Resources on December 22, 2024 and sell it today you would earn a total of  150.00  from holding Northern Star Resources or generate 16.61% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Northern Star Resources

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Penta Ocean reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Penta Ocean and Northern Star

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

The idea behind Penta Ocean Construction Co and Northern Star 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.