Correlation Between NovaGold Resources and Centerra Gold

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

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

Diversification Opportunities for NovaGold Resources and Centerra Gold

-0.36

Correlation Coefficient

NovaGold Resources  Centerra Gold

Very good diversification

The 3 months correlation between NovaGold and Centerra is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Centerra Gold go up and down completely randomly.

Pair Corralation between NovaGold Resources and Centerra Gold

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Centerra Gold. In addition to that, NovaGold Resources is 1.36 times more volatile than Centerra Gold. It trades about -0.08 of its total potential returns per unit of risk. Centerra Gold is currently generating about 0.03 per unit of volatility. If you would invest  845.00  in Centerra Gold on November 29, 2024 and sell it today you would earn a total of  16.00  from holding Centerra Gold or generate 1.89% return on investment over 90 days.

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

NovaGold Resources  vs.  Centerra Gold

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Centerra Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Centerra Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NovaGold Resources and Centerra Gold

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

The idea behind NovaGold Resources and Centerra Gold 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.