Correlation Between North American and Newmont

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

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

Diversification Opportunities for North American and Newmont

-0.84

Correlation Coefficient

North American  Newmont

Pay attention - limited upside

The 3 months correlation between North and Newmont is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont and North American 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 North American Construction are associated (or correlated) with Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of North American i.e., North American and Newmont go up and down completely randomly.

Pair Corralation between North American and Newmont

Assuming the 90 days horizon North American Construction is expected to generate 1.11 times more return on investment than Newmont. However, North American is 1.11 times more volatile than Newmont. It trades about 0.05 of its potential returns per unit of risk. Newmont is currently generating about -0.02 per unit of risk. If you would invest  1,778  in North American Construction on October 4, 2024 and sell it today you would earn a total of  222.00  from holding North American Construction or generate 12.49% return on investment over 90 days.

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

North American Construction  vs.  Newmont

North American Const

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with North American and Newmont

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

The idea behind North American Construction and Newmont 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.