Correlation Between NovaGold Resources and Group Eleven

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

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

Diversification Opportunities for NovaGold Resources and Group Eleven

0.71

Correlation Coefficient

NovaGold Resources  Group Eleven

Poor diversification

The 3 months correlation between NovaGold and Group is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Group Eleven Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group Eleven Resources 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 Group Eleven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group Eleven Resources has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Group Eleven go up and down completely randomly.

Pair Corralation between NovaGold Resources and Group Eleven

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Group Eleven. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 1.83 times less risky than Group Eleven. The stock trades about -0.02 of its potential returns per unit of risk. The Group Eleven Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Group Eleven Resources on September 21, 2024 and sell it today you would earn a total of  8.50  from holding Group Eleven Resources or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

NovaGold Resources  vs.  Group Eleven Resources

NovaGold Resources

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Group Eleven Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Group Eleven Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NovaGold Resources and Group Eleven

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

The idea behind NovaGold Resources and Group Eleven Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.