Correlation Between Nevada King and New Found

Can any of the company-specific risk be diversified away by investing in both Nevada King and New Found 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 Nevada King and New Found into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nevada King Gold and New Found Gold, you can compare the effects of market volatilities on Nevada King and New Found 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 Nevada King with a short position of New Found. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nevada King and New Found.

Diversification Opportunities for Nevada King and New Found

0.8

Correlation Coefficient

Nevada King  New Found

Very poor diversification

The 3 months correlation between Nevada and New is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nevada King Gold and New Found Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Found Gold and Nevada King 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 Nevada King Gold are associated (or correlated) with New Found. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Found Gold has no effect on the direction of Nevada King i.e., Nevada King and New Found go up and down completely randomly.

Pair Corralation between Nevada King and New Found

Assuming the 90 days horizon Nevada King Gold is expected to generate 1.06 times more return on investment than New Found. However, Nevada King is 1.06 times more volatile than New Found Gold. It trades about -0.05 of its potential returns per unit of risk. New Found Gold is currently generating about -0.1 per unit of risk. If you would invest  34.00  in Nevada King Gold on September 4, 2024 and sell it today you would lose (6.00) from holding Nevada King Gold or give up 17.65% of portfolio value over 90 days.

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

Nevada King Gold  vs.  New Found Gold

Nevada King Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nevada King Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

New Found Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Found Gold 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nevada King and New Found

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

The idea behind Nevada King Gold and New Found Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.