Correlation Between NovaGold Resources and Arizona Sonoran

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

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

Diversification Opportunities for NovaGold Resources and Arizona Sonoran

0.67

Correlation Coefficient

NovaGold Resources  Arizona Sonoran

Poor diversification

The 3 months correlation between NovaGold and Arizona is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Arizona Sonoran Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Sonoran Copper and NovaGold Resources 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 NovaGold Resources are associated (or correlated) with Arizona Sonoran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Sonoran Copper has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Arizona Sonoran go up and down completely randomly.

Pair Corralation between NovaGold Resources and Arizona Sonoran

Assuming the 90 days horizon NovaGold Resources is expected to generate 1.72 times more return on investment than Arizona Sonoran. However, NovaGold Resources is 1.72 times more volatile than Arizona Sonoran Copper. It trades about 0.25 of its potential returns per unit of risk. Arizona Sonoran Copper is currently generating about 0.33 per unit of risk. If you would invest  459.00  in NovaGold Resources on September 13, 2024 and sell it today you would earn a total of  85.00  from holding NovaGold Resources or generate 18.52% return on investment over 90 days.

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

NovaGold Resources  vs.  Arizona Sonoran Copper

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Arizona Sonoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arizona Sonoran Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NovaGold Resources and Arizona Sonoran

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

The idea behind NovaGold Resources and Arizona Sonoran Copper 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.