Correlation Between HPQ Silicon and NovaGold Resources

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

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

Diversification Opportunities for HPQ Silicon and NovaGold Resources

0.59

Correlation Coefficient

HPQ Silicon  NovaGold Resources

Very weak diversification

The 3 months correlation between HPQ and NovaGold is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and HPQ Silicon 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 HPQ Silicon Resources 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 HPQ Silicon i.e., HPQ Silicon and NovaGold Resources go up and down completely randomly.

Pair Corralation between HPQ Silicon and NovaGold Resources

Assuming the 90 days horizon HPQ Silicon Resources is expected to under-perform the NovaGold Resources. In addition to that, HPQ Silicon is 1.09 times more volatile than NovaGold Resources. It trades about -0.19 of its total potential returns per unit of risk. NovaGold Resources is currently generating about -0.02 per unit of volatility. If you would invest  539.00  in NovaGold Resources on September 3, 2024 and sell it today you would lose (40.00) from holding NovaGold Resources or give up 7.42% of portfolio value over 90 days.

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

HPQ Silicon Resources  vs.  NovaGold Resources

HPQ Silicon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HPQ Silicon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HPQ Silicon and NovaGold Resources

The main advantage of trading using opposite HPQ Silicon and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HPQ Silicon 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 HPQ Silicon Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.