Correlation Between NovaGold Resources and International Tower

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

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

Diversification Opportunities for NovaGold Resources and International Tower

0.33

Correlation Coefficient

NovaGold Resources  International Tower

Weak diversification

The 3 months correlation between NovaGold and International is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and International Tower Hill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Tower Hill 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 International Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Tower Hill has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and International Tower go up and down completely randomly.

Pair Corralation between NovaGold Resources and International Tower

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the International Tower. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 1.34 times less risky than International Tower. The stock trades about -0.03 of its potential returns per unit of risk. The International Tower Hill is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  64.00  in International Tower Hill on December 25, 2024 and sell it today you would earn a total of  33.00  from holding International Tower Hill or generate 51.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NovaGold Resources  vs.  International Tower Hill

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 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.

International Tower Hill

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Tower Hill are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, International Tower displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and International Tower

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

The idea behind NovaGold Resources and International Tower Hill 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.