Correlation Between International Tower and NovaGold Resources

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

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

Diversification Opportunities for International Tower and NovaGold Resources

0.33

Correlation Coefficient

International Tower  NovaGold Resources

Weak diversification

The 3 months correlation between International and NovaGold is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding International Tower Hill and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and International Tower 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 International Tower Hill 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 International Tower i.e., International Tower and NovaGold Resources go up and down completely randomly.

Pair Corralation between International Tower and NovaGold Resources

Assuming the 90 days trading horizon International Tower Hill is expected to generate 1.34 times more return on investment than NovaGold Resources. However, International Tower is 1.34 times more volatile than NovaGold Resources. It trades about 0.19 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.03 per unit of risk. If you would invest  64.00  in International Tower Hill on December 25, 2024 and sell it today you would earn a total of  33.00  from holding International Tower Hill or generate 51.56% return on investment over 90 days.

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

International Tower Hill  vs.  NovaGold Resources

International Tower Hill

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Tower Hill are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, International Tower displayed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with International Tower and NovaGold Resources

The main advantage of trading using opposite International Tower and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Tower 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 International Tower Hill 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.