Correlation Between Novo Resources and Red Pine

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

Diversification Opportunities for Novo Resources and Red Pine

0.5

Correlation Coefficient

Novo Resources  Red Pine

Very weak diversification

The 3 months correlation between Novo and Red is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration 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 Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of Novo Resources i.e., Novo Resources and Red Pine go up and down completely randomly.

Pair Corralation between Novo Resources and Red Pine

Assuming the 90 days horizon Novo Resources Corp is expected to under-perform the Red Pine. But the otc stock apears to be less risky and, when comparing its historical volatility, Novo Resources Corp is 1.36 times less risky than Red Pine. The otc stock trades about -0.02 of its potential returns per unit of risk. The Red Pine Exploration is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Red Pine Exploration on September 4, 2024 and sell it today you would lose (5.29) from holding Red Pine Exploration or give up 37.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Novo Resources Corp  vs.  Red Pine Exploration

Novo Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Red Pine Exploration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Pine Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Red Pine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Resources and Red Pine

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

The idea behind Novo Resources Corp and Red Pine Exploration 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.