Correlation Between Silver Mines and Northern Star

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

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

Diversification Opportunities for Silver Mines and Northern Star

0.71

Correlation Coefficient

Silver Mines  Northern Star

Poor diversification

The 3 months correlation between Silver and Northern is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Silver Mines 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 Silver Mines 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 Silver Mines 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 Silver Mines i.e., Silver Mines and Northern Star go up and down completely randomly.

Pair Corralation between Silver Mines and Northern Star

Assuming the 90 days trading horizon Silver Mines is expected to generate 2.74 times more return on investment than Northern Star. However, Silver Mines is 2.74 times more volatile than Northern Star Resources. It trades about 0.13 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.19 per unit of risk. If you would invest  8.00  in Silver Mines on December 30, 2024 and sell it today you would earn a total of  3.00  from holding Silver Mines or generate 37.5% return on investment over 90 days.

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

Silver Mines  vs.  Northern Star Resources

Silver Mines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Mines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Silver Mines unveiled 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 14 (%) 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.

Pair Trading with Silver Mines and Northern Star

The main advantage of trading using opposite Silver Mines and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Mines 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 Silver Mines 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.