Correlation Between NovaGold Resources and Golden Arrow

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

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

Diversification Opportunities for NovaGold Resources and Golden Arrow

-0.41

Correlation Coefficient

NovaGold Resources  Golden Arrow

Very good diversification

The 3 months correlation between NovaGold and Golden is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Golden Arrow Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Arrow Resources 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 Golden Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Arrow Resources has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Golden Arrow go up and down completely randomly.

Pair Corralation between NovaGold Resources and Golden Arrow

Assuming the 90 days horizon NovaGold Resources is expected to generate 24.28 times less return on investment than Golden Arrow. But when comparing it to its historical volatility, NovaGold Resources is 1.71 times less risky than Golden Arrow. It trades about 0.01 of its potential returns per unit of risk. Golden Arrow Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Golden Arrow Resources on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Golden Arrow Resources or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NovaGold Resources  vs.  Golden Arrow Resources

NovaGold Resources

Risk-Adjusted Performance

0 of 100

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.

Golden Arrow Resources

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with NovaGold Resources and Golden Arrow

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

The idea behind NovaGold Resources and Golden Arrow Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.