Correlation Between Novo Resources and Irving Resources

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

By analyzing existing cross correlation between Novo Resources Corp and Irving Resources, you can compare the effects of market volatilities on Novo Resources and Irving Resources 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 Novo Resources with a short position of Irving Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Resources and Irving Resources.

Diversification Opportunities for Novo Resources and Irving Resources

-0.6

Correlation Coefficient

Novo Resources  Irving Resources

Excellent diversification

The 3 months correlation between Novo and Irving is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Irving Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irving Resources and Novo 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 Novo Resources Corp are associated (or correlated) with Irving Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irving Resources has no effect on the direction of Novo Resources i.e., Novo Resources and Irving Resources go up and down completely randomly.

Pair Corralation between Novo Resources and Irving Resources

Assuming the 90 days horizon Novo Resources Corp is expected to generate 0.76 times more return on investment than Irving Resources. However, Novo Resources Corp is 1.32 times less risky than Irving Resources. It trades about 0.12 of its potential returns per unit of risk. Irving Resources is currently generating about -0.07 per unit of risk. If you would invest  5.00  in Novo Resources Corp on November 28, 2024 and sell it today you would earn a total of  1.60  from holding Novo Resources Corp or generate 32.0% return on investment over 90 days.

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

Novo Resources Corp  vs.  Irving Resources

Novo Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Novo Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Irving Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Irving Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Novo Resources and Irving Resources

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

The idea behind Novo Resources Corp and Irving 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.