Correlation Between NovaGold Resources and Eastwood Bio-Medical

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

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

Diversification Opportunities for NovaGold Resources and Eastwood Bio-Medical

-0.31

Correlation Coefficient

NovaGold Resources  Eastwood Bio-Medical

Very good diversification

The 3 months correlation between NovaGold and Eastwood is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Eastwood Bio Medical Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastwood Bio Medical 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 Eastwood Bio-Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastwood Bio Medical has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Eastwood Bio-Medical go up and down completely randomly.

Pair Corralation between NovaGold Resources and Eastwood Bio-Medical

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Eastwood Bio-Medical. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 4.7 times less risky than Eastwood Bio-Medical. The stock trades about -0.01 of its potential returns per unit of risk. The Eastwood Bio Medical Canada is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Eastwood Bio Medical Canada on September 2, 2024 and sell it today you would lose (11.00) from holding Eastwood Bio Medical Canada or give up 12.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

NovaGold Resources  vs.  Eastwood Bio Medical Canada

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

Eastwood Bio Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastwood Bio Medical Canada are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eastwood Bio-Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Eastwood Bio-Medical

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

The idea behind NovaGold Resources and Eastwood Bio Medical Canada 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.