Correlation Between CI Financial and NovaGold Resources

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

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

Diversification Opportunities for CI Financial and NovaGold Resources

-0.49

Correlation Coefficient

CI Financial  NovaGold Resources

Very good diversification

The 3 months correlation between CIX and NovaGold is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CI Financial Corp and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and CI Financial 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 CI Financial Corp 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 CI Financial i.e., CI Financial and NovaGold Resources go up and down completely randomly.

Pair Corralation between CI Financial and NovaGold Resources

Assuming the 90 days trading horizon CI Financial Corp is expected to generate 1.22 times more return on investment than NovaGold Resources. However, CI Financial is 1.22 times more volatile than NovaGold Resources. It trades about 0.26 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.01 per unit of risk. If you would invest  1,705  in CI Financial Corp on September 2, 2024 and sell it today you would earn a total of  1,400  from holding CI Financial Corp or generate 82.11% return on investment over 90 days.

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

CI Financial Corp  vs.  NovaGold Resources

CI Financial Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

NovaGold Resources

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, NovaGold Resources is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Financial and NovaGold Resources

The main advantage of trading using opposite CI Financial and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Financial 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 CI Financial Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.