Correlation Between NovaGold Resources and Geodrill

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

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

Diversification Opportunities for NovaGold Resources and Geodrill

-0.27

Correlation Coefficient

NovaGold Resources  Geodrill

Very good diversification

The 3 months correlation between NovaGold and Geodrill is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited 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 Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Geodrill go up and down completely randomly.

Pair Corralation between NovaGold Resources and Geodrill

Assuming the 90 days horizon NovaGold Resources is expected to generate 1.32 times more return on investment than Geodrill. However, NovaGold Resources is 1.32 times more volatile than Geodrill Limited. It trades about 0.25 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.23 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NovaGold Resources  vs.  Geodrill Limited

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.

Geodrill Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Geodrill

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

The idea behind NovaGold Resources and Geodrill Limited 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.