Correlation Between Northern Dynasty and Solitario Exploration

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

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

Diversification Opportunities for Northern Dynasty and Solitario Exploration

-0.76

Correlation Coefficient

Northern Dynasty  Solitario Exploration

Pay attention - limited upside

The 3 months correlation between Northern and Solitario is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Northern Dynasty Minerals and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario Exploration and Northern Dynasty 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 Northern Dynasty Minerals are associated (or correlated) with Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Northern Dynasty i.e., Northern Dynasty and Solitario Exploration go up and down completely randomly.

Pair Corralation between Northern Dynasty and Solitario Exploration

Considering the 90-day investment horizon Northern Dynasty Minerals is expected to generate 1.27 times more return on investment than Solitario Exploration. However, Northern Dynasty is 1.27 times more volatile than Solitario Exploration Royalty. It trades about 0.14 of its potential returns per unit of risk. Solitario Exploration Royalty is currently generating about -0.07 per unit of risk. If you would invest  32.00  in Northern Dynasty Minerals on September 4, 2024 and sell it today you would earn a total of  14.00  from holding Northern Dynasty Minerals or generate 43.75% return on investment over 90 days.

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

Northern Dynasty Minerals  vs.  Solitario Exploration Royalty

Northern Dynasty Minerals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Dynasty Minerals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Northern Dynasty disclosed solid returns over the last few months and may actually be approaching a breakup point.

Solitario Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitario Exploration Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Northern Dynasty and Solitario Exploration

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

The idea behind Northern Dynasty Minerals and Solitario Exploration Royalty 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.