Correlation Between Novo Resources and E L

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

Diversification Opportunities for Novo Resources and E L

0.67

Correlation Coefficient

Novo Resources  E L

Poor diversification

The 3 months correlation between Novo and ELF-PG is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and E L Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial 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 E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of Novo Resources i.e., Novo Resources and E L go up and down completely randomly.

Pair Corralation between Novo Resources and E L

Assuming the 90 days trading horizon Novo Resources Corp is expected to generate 5.49 times more return on investment than E L. However, Novo Resources is 5.49 times more volatile than E L Financial Corp. It trades about 0.1 of its potential returns per unit of risk. E L Financial Corp is currently generating about 0.07 per unit of risk. If you would invest  8.30  in Novo Resources Corp on October 11, 2024 and sell it today you would earn a total of  0.70  from holding Novo Resources Corp or generate 8.43% return on investment over 90 days.

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

Novo Resources Corp  vs.  E L Financial Corp

Novo Resources Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Novo Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

E L Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E L Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Novo Resources and E L

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

The idea behind Novo Resources Corp and E L Financial Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.