Correlation Between South Star and Northern Graphite

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

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

Diversification Opportunities for South Star and Northern Graphite

-0.47

Correlation Coefficient

South Star  Northern Graphite

Very good diversification

The 3 months correlation between South and Northern is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding South Star Battery and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and South 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 South Star Battery are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of South Star i.e., South Star and Northern Graphite go up and down completely randomly.

Pair Corralation between South Star and Northern Graphite

Assuming the 90 days horizon South Star Battery is expected to under-perform the Northern Graphite. But the otc stock apears to be less risky and, when comparing its historical volatility, South Star Battery is 1.43 times less risky than Northern Graphite. The otc stock trades about -0.03 of its potential returns per unit of risk. The Northern Graphite is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Northern Graphite on October 24, 2024 and sell it today you would lose (1.00) from holding Northern Graphite or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

South Star Battery  vs.  Northern Graphite

South Star Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Star Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, South Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Northern Graphite

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with South Star and Northern Graphite

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

The idea behind South Star Battery and Northern Graphite 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.