Correlation Between NovaGold Resources and Starcore International

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

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

Diversification Opportunities for NovaGold Resources and Starcore International

-0.47

Correlation Coefficient

NovaGold Resources  Starcore International

Very good diversification

The 3 months correlation between NovaGold and Starcore is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Starcore International Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starcore International 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 Starcore International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starcore International has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Starcore International go up and down completely randomly.

Pair Corralation between NovaGold Resources and Starcore International

Assuming the 90 days horizon NovaGold Resources is expected to generate 76.56 times less return on investment than Starcore International. But when comparing it to its historical volatility, NovaGold Resources is 2.36 times less risky than Starcore International. It trades about 0.0 of its potential returns per unit of risk. Starcore International Mines is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Starcore International Mines on September 7, 2024 and sell it today you would earn a total of  4.00  from holding Starcore International Mines or generate 36.36% return on investment over 90 days.

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

NovaGold Resources  vs.  Starcore International Mines

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.

Starcore International

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starcore International Mines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Starcore International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Starcore International

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

The idea behind NovaGold Resources and Starcore International Mines 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.