Correlation Between NovaGold Resources and Payfare

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

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

Diversification Opportunities for NovaGold Resources and Payfare

-0.27

Correlation Coefficient

NovaGold Resources  Payfare

Very good diversification

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

Pair Corralation between NovaGold Resources and Payfare

Assuming the 90 days horizon NovaGold Resources is expected to generate 76.02 times less return on investment than Payfare. But when comparing it to its historical volatility, NovaGold Resources is 5.35 times less risky than Payfare. It trades about 0.02 of its potential returns per unit of risk. Payfare is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Payfare on October 11, 2024 and sell it today you would earn a total of  174.00  from holding Payfare or generate 80.93% 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.  Payfare

NovaGold Resources

Risk-Adjusted Performance

2 of 100

Weak

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 unfluctuating basic indicators, NovaGold Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Payfare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Payfare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Payfare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Payfare

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

The idea behind NovaGold Resources and Payfare 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.