Correlation Between Northcliff Resources and Asiabasemetals

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

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

Diversification Opportunities for Northcliff Resources and Asiabasemetals

-0.36

Correlation Coefficient

Northcliff Resources  Asiabasemetals

Very good diversification

The 3 months correlation between Northcliff and Asiabasemetals is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Northcliff Resources and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals and Northcliff Resources 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 Northcliff Resources are associated (or correlated) with Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Northcliff Resources i.e., Northcliff Resources and Asiabasemetals go up and down completely randomly.

Pair Corralation between Northcliff Resources and Asiabasemetals

Assuming the 90 days trading horizon Northcliff Resources is expected to generate 2.54 times more return on investment than Asiabasemetals. However, Northcliff Resources is 2.54 times more volatile than Asiabasemetals. It trades about 0.11 of its potential returns per unit of risk. Asiabasemetals is currently generating about -0.03 per unit of risk. If you would invest  2.00  in Northcliff Resources on September 4, 2024 and sell it today you would earn a total of  1.00  from holding Northcliff Resources or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Northcliff Resources  vs.  Asiabasemetals

Northcliff Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northcliff Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Northcliff Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Asiabasemetals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Asiabasemetals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Northcliff Resources and Asiabasemetals

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

The idea behind Northcliff Resources and Asiabasemetals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.