Correlation Between NovaGold Resources and S A P

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

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

Diversification Opportunities for NovaGold Resources and S A P

-0.06

Correlation Coefficient

NovaGold Resources  S A P

Good diversification

The 3 months correlation between NovaGold and SAP is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and S A P go up and down completely randomly.

Pair Corralation between NovaGold Resources and S A P

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the S A P. In addition to that, NovaGold Resources is 2.2 times more volatile than Saputo Inc. It trades about -0.04 of its total potential returns per unit of risk. Saputo Inc is currently generating about 0.0 per unit of volatility. If you would invest  2,474  in Saputo Inc on December 29, 2024 and sell it today you would lose (16.00) from holding Saputo Inc or give up 0.65% of portfolio value over 90 days.

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

NovaGold Resources  vs.  Saputo Inc

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Saputo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, S A P is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NovaGold Resources and S A P

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

The idea behind NovaGold Resources and Saputo Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.