Correlation Between COMPUTERSHARE and Northern Star

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

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

Diversification Opportunities for COMPUTERSHARE and Northern Star

0.19

Correlation Coefficient

COMPUTERSHARE  Northern Star

Average diversification

The 3 months correlation between COMPUTERSHARE and Northern is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding COMPUTERSHARE 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 COMPUTERSHARE 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 COMPUTERSHARE 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 COMPUTERSHARE i.e., COMPUTERSHARE and Northern Star go up and down completely randomly.

Pair Corralation between COMPUTERSHARE and Northern Star

Assuming the 90 days trading horizon COMPUTERSHARE is expected to generate 0.71 times more return on investment than Northern Star. However, COMPUTERSHARE is 1.42 times less risky than Northern Star. It trades about 0.18 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.04 per unit of risk. If you would invest  1,650  in COMPUTERSHARE on September 17, 2024 and sell it today you would earn a total of  350.00  from holding COMPUTERSHARE or generate 21.21% return on investment over 90 days.

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

COMPUTERSHARE  vs.  Northern Star Resources

COMPUTERSHARE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Northern Star Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Star is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COMPUTERSHARE and Northern Star

The main advantage of trading using opposite COMPUTERSHARE and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMPUTERSHARE 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 COMPUTERSHARE 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 Transaction History module to view history of all your transactions and understand their impact on performance.