Correlation Between Dakota Gold and Nova Minerals

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

By analyzing existing cross correlation between Dakota Gold Corp and Nova Minerals Limited, you can compare the effects of market volatilities on Dakota Gold and Nova Minerals 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 Dakota Gold with a short position of Nova Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dakota Gold and Nova Minerals.

Diversification Opportunities for Dakota Gold and Nova Minerals

-0.2

Correlation Coefficient

Dakota Gold  Nova Minerals

Good diversification

The 3 months correlation between Dakota and Nova is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dakota Gold Corp and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited and Dakota Gold 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 Dakota Gold Corp are associated (or correlated) with Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of Dakota Gold i.e., Dakota Gold and Nova Minerals go up and down completely randomly.

Pair Corralation between Dakota Gold and Nova Minerals

Allowing for the 90-day total investment horizon Dakota Gold is expected to generate 35.45 times less return on investment than Nova Minerals. But when comparing it to its historical volatility, Dakota Gold Corp is 5.28 times less risky than Nova Minerals. It trades about 0.02 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Nova Minerals Limited on September 13, 2024 and sell it today you would earn a total of  235.00  from holding Nova Minerals Limited or generate 123.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Dakota Gold Corp  vs.  Nova Minerals Limited

Dakota Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dakota Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dakota Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nova Minerals Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nova Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dakota Gold and Nova Minerals

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

The idea behind Dakota Gold Corp and Nova Minerals Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.