Correlation Between NovaGold Resources and Itafos Corp

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

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

Diversification Opportunities for NovaGold Resources and Itafos Corp

-0.32

Correlation Coefficient

NovaGold Resources  Itafos Corp

Very good diversification

The 3 months correlation between NovaGold and Itafos is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Itafos Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itafos Corp 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 Itafos Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itafos Corp has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Itafos Corp go up and down completely randomly.

Pair Corralation between NovaGold Resources and Itafos Corp

Assuming the 90 days horizon NovaGold Resources is expected to generate 4.61 times less return on investment than Itafos Corp. In addition to that, NovaGold Resources is 1.13 times more volatile than Itafos Corp. It trades about 0.03 of its total potential returns per unit of risk. Itafos Corp is currently generating about 0.17 per unit of volatility. If you would invest  177.00  in Itafos Corp on December 21, 2024 and sell it today you would earn a total of  52.00  from holding Itafos Corp or generate 29.38% 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.  Itafos Corp

NovaGold Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NovaGold Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Itafos Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itafos Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Itafos Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Itafos Corp

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

The idea behind NovaGold Resources and Itafos Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.