Correlation Between NovaGold Resources and China Green

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

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

Diversification Opportunities for NovaGold Resources and China Green

-0.54

Correlation Coefficient

NovaGold Resources  China Green

Excellent diversification

The 3 months correlation between NovaGold and China is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and China Green Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Green Agriculture 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 China Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Green Agriculture has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and China Green go up and down completely randomly.

Pair Corralation between NovaGold Resources and China Green

Allowing for the 90-day total investment horizon NovaGold Resources is expected to under-perform the China Green. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 1.9 times less risky than China Green. The stock trades about -0.01 of its potential returns per unit of risk. The China Green Agriculture is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  498.00  in China Green Agriculture on September 1, 2024 and sell it today you would lose (300.00) from holding China Green Agriculture or give up 60.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.59%
Values	Daily Returns

NovaGold Resources  vs.  China Green Agriculture

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. 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.

China Green Agriculture

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Green Agriculture are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, China Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and China Green

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

The idea behind NovaGold Resources and China Green Agriculture 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.