Correlation Between NovaGold Resources and PowerOf Canada

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

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

Diversification Opportunities for NovaGold Resources and PowerOf Canada

-0.08

Correlation Coefficient

NovaGold Resources  PowerOf Canada

Good diversification

The 3 months correlation between NovaGold and PowerOf is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerOf Canada 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 PowerOf Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerOf Canada has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and PowerOf Canada go up and down completely randomly.

Pair Corralation between NovaGold Resources and PowerOf Canada

Assuming the 90 days horizon NovaGold Resources is expected to generate 2.21 times less return on investment than PowerOf Canada. In addition to that, NovaGold Resources is 2.48 times more volatile than Power. It trades about 0.03 of its total potential returns per unit of risk. Power is currently generating about 0.16 per unit of volatility. If you would invest  4,472  in Power on December 24, 2024 and sell it today you would earn a total of  522.00  from holding Power or generate 11.67% 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.  Power

NovaGold Resources

Risk-Adjusted Performance

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 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.

PowerOf Canada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PowerOf Canada may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NovaGold Resources and PowerOf Canada

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

The idea behind NovaGold Resources and Power 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.