Correlation Between Niagara Mohawk and Golden Star

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

By analyzing existing cross correlation between Niagara Mohawk Power and Golden Star Resource, you can compare the effects of market volatilities on Niagara Mohawk and Golden 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 Niagara Mohawk with a short position of Golden Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niagara Mohawk and Golden Star.

Diversification Opportunities for Niagara Mohawk and Golden Star

0.85

Correlation Coefficient

Niagara Mohawk  Golden Star

Very poor diversification

The 3 months correlation between Niagara and Golden is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Niagara Mohawk Power and Golden Star Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Star Resource and Niagara Mohawk 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 Niagara Mohawk Power are associated (or correlated) with Golden Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Star Resource has no effect on the direction of Niagara Mohawk i.e., Niagara Mohawk and Golden Star go up and down completely randomly.

Pair Corralation between Niagara Mohawk and Golden Star

Assuming the 90 days horizon Niagara Mohawk is expected to generate 4.43 times less return on investment than Golden Star. But when comparing it to its historical volatility, Niagara Mohawk Power is 3.51 times less risky than Golden Star. It trades about 0.1 of its potential returns per unit of risk. Golden Star Resource is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Golden Star Resource on September 12, 2024 and sell it today you would earn a total of  15.00  from holding Golden Star Resource or generate 15.0% return on investment over 90 days.

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

Niagara Mohawk Power  vs.  Golden Star Resource

Niagara Mohawk Power

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Niagara Mohawk is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Golden Star Resource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Star Resource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Golden Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Niagara Mohawk and Golden Star

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

The idea behind Niagara Mohawk Power and Golden Star Resource 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.