Correlation Between NV Gold and World Copper

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

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

Diversification Opportunities for NV Gold and World Copper

0.4

Correlation Coefficient

NV Gold  World Copper

Very weak diversification

The 3 months correlation between NVX and World is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NV Gold Corp and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper and NV Gold 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 NV Gold Corp are associated (or correlated) with World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of NV Gold i.e., NV Gold and World Copper go up and down completely randomly.

Pair Corralation between NV Gold and World Copper

Assuming the 90 days horizon NV Gold Corp is expected to under-perform the World Copper. But the stock apears to be less risky and, when comparing its historical volatility, NV Gold Corp is 1.48 times less risky than World Copper. The stock trades about -0.01 of its potential returns per unit of risk. The World Copper is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.50  in World Copper on December 20, 2024 and sell it today you would lose (0.50) from holding World Copper or give up 7.69% of portfolio value over 90 days.

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

NV Gold Corp  vs.  World Copper

NV Gold Corp

Risk-Adjusted Performance

Weak

Over the last 90 days NV Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, NV Gold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

World Copper

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Copper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, World Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NV Gold and World Copper

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

The idea behind NV Gold Corp and World Copper 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.