Correlation Between Novo Resources and Winpak

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

Diversification Opportunities for Novo Resources and Winpak

-0.45

Correlation Coefficient

Novo Resources  Winpak

Very good diversification

The 3 months correlation between Novo and Winpak is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Winpak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winpak 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 Winpak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winpak has no effect on the direction of Novo Resources i.e., Novo Resources and Winpak go up and down completely randomly.

Pair Corralation between Novo Resources and Winpak

Assuming the 90 days trading horizon Novo Resources Corp is expected to generate 2.56 times more return on investment than Winpak. However, Novo Resources is 2.56 times more volatile than Winpak. It trades about 0.0 of its potential returns per unit of risk. Winpak is currently generating about -0.03 per unit of risk. If you would invest  9.50  in Novo Resources Corp on October 23, 2024 and sell it today you would lose (0.50) from holding Novo Resources Corp or give up 5.26% of portfolio value over 90 days.

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

Novo Resources Corp  vs.  Winpak

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. In spite of very healthy basic indicators, Novo Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Winpak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winpak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Winpak is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Novo Resources and Winpak

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

The idea behind Novo Resources Corp and Winpak 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.