Correlation Between Algoma Steel and NovaGold Resources

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

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

Diversification Opportunities for Algoma Steel and NovaGold Resources

0.16

Correlation Coefficient

Algoma Steel  NovaGold Resources

Average diversification

The 3 months correlation between Algoma and NovaGold is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Algoma Steel 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 Algoma Steel Group are associated (or correlated) with NovaGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaGold Resources has no effect on the direction of Algoma Steel i.e., Algoma Steel and NovaGold Resources go up and down completely randomly.

Pair Corralation between Algoma Steel and NovaGold Resources

Given the investment horizon of 90 days Algoma Steel Group is expected to under-perform the NovaGold Resources. In addition to that, Algoma Steel is 1.11 times more volatile than NovaGold Resources. It trades about -0.23 of its total potential returns per unit of risk. NovaGold Resources is currently generating about -0.04 per unit of volatility. If you would invest  469.00  in NovaGold Resources on December 30, 2024 and sell it today you would lose (47.00) from holding NovaGold Resources or give up 10.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Algoma Steel Group  vs.  NovaGold Resources

Algoma Steel Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Algoma Steel Group 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NovaGold Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days NovaGold Resources 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Algoma Steel and NovaGold Resources

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

The idea behind Algoma Steel Group and NovaGold Resources 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.