Correlation Between NovaGold Resources and Aris Mining

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

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

Diversification Opportunities for NovaGold Resources and Aris Mining

0.16

Correlation Coefficient

NovaGold Resources  Aris Mining

Average diversification

The 3 months correlation between NovaGold and Aris is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining 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 Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Aris Mining go up and down completely randomly.

Pair Corralation between NovaGold Resources and Aris Mining

Allowing for the 90-day total investment horizon NovaGold Resources is expected to under-perform the Aris Mining. In addition to that, NovaGold Resources is 1.02 times more volatile than Aris Mining. It trades about -0.03 of its total potential returns per unit of risk. Aris Mining is currently generating about 0.16 per unit of volatility. If you would invest  354.00  in Aris Mining on December 27, 2024 and sell it today you would earn a total of  107.00  from holding Aris Mining or generate 30.23% return on investment over 90 days.

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

NovaGold Resources  vs.  Aris Mining

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. Despite nearly stable technical and fundamental indicators, NovaGold Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aris Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Aris Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Aris Mining

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

The idea behind NovaGold Resources and Aris Mining 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.