Correlation Between Northern Star and AngloGold Ashanti

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

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

Diversification Opportunities for Northern Star and AngloGold Ashanti

0.33

Correlation Coefficient

Northern Star  AngloGold Ashanti

Weak diversification

The 3 months correlation between Northern and AngloGold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc and Northern 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 Northern Star Resources are associated (or correlated) with AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of Northern Star i.e., Northern Star and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between Northern Star and AngloGold Ashanti

Assuming the 90 days horizon Northern Star Resources is expected to generate 1.36 times more return on investment than AngloGold Ashanti. However, Northern Star is 1.36 times more volatile than AngloGold Ashanti plc. It trades about 0.02 of its potential returns per unit of risk. AngloGold Ashanti plc is currently generating about -0.02 per unit of risk. If you would invest  1,065  in Northern Star Resources on September 13, 2024 and sell it today you would lose (5.00) from holding Northern Star Resources or give up 0.47% of portfolio value over 90 days.

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

Northern Star Resources  vs.  AngloGold Ashanti plc

Northern Star Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AngloGold Ashanti plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AngloGold Ashanti plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AngloGold Ashanti is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northern Star and AngloGold Ashanti

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

The idea behind Northern Star Resources and AngloGold Ashanti plc 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.

Check out your portfolio center.

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.