Correlation Between Stellar and Northern Global

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

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

Diversification Opportunities for Stellar and Northern Global

0.12

Correlation Coefficient

Stellar  Northern Global

Average diversification

The 3 months correlation between Stellar and Northern is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Northern Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Tactical and Stellar 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 Stellar are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Tactical has no effect on the direction of Stellar i.e., Stellar and Northern Global go up and down completely randomly.

Pair Corralation between Stellar and Northern Global

Assuming the 90 days trading horizon Stellar is expected to generate 24.23 times more return on investment than Northern Global. However, Stellar is 24.23 times more volatile than Northern Global Tactical. It trades about 0.25 of its potential returns per unit of risk. Northern Global Tactical is currently generating about 0.04 per unit of risk. If you would invest  9.66  in Stellar on October 26, 2024 and sell it today you would earn a total of  33.34  from holding Stellar or generate 345.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Stellar  vs.  Northern Global Tactical

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Northern Global Tactical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Global Tactical are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Northern Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stellar and Northern Global

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

The idea behind Stellar and Northern Global Tactical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..