Correlation Between NovaGold Resources and Collective Mining

Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and Collective 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 Collective 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 Collective Mining, you can compare the effects of market volatilities on NovaGold Resources and Collective 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 Collective Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Collective Mining.

Diversification Opportunities for NovaGold Resources and Collective Mining

-0.39

Correlation Coefficient

NovaGold Resources  Collective Mining

Very good diversification

The 3 months correlation between NovaGold and Collective is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Collective Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collective 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 Collective Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collective Mining has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Collective Mining go up and down completely randomly.

Pair Corralation between NovaGold Resources and Collective Mining

Allowing for the 90-day total investment horizon NovaGold Resources is expected to under-perform the Collective Mining. In addition to that, NovaGold Resources is 1.1 times more volatile than Collective Mining. It trades about -0.01 of its total potential returns per unit of risk. Collective Mining is currently generating about 0.11 per unit of volatility. If you would invest  376.00  in Collective Mining on October 6, 2024 and sell it today you would earn a total of  45.00  from holding Collective Mining or generate 11.97% return on investment over 90 days.

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

NovaGold Resources  vs.  Collective Mining

NovaGold Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NovaGold Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Collective Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Collective Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Collective Mining

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

The idea behind NovaGold Resources and Collective 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.