Correlation Between Sabio Holdings and NovaGold Resources

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

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

Diversification Opportunities for Sabio Holdings and NovaGold Resources

-0.29

Correlation Coefficient

Sabio Holdings  NovaGold Resources

Very good diversification

The 3 months correlation between Sabio and NovaGold is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sabio Holdings and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Sabio Holdings 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 Sabio Holdings are associated (or correlated) with NovaGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaGold Resources has no effect on the direction of Sabio Holdings i.e., Sabio Holdings and NovaGold Resources go up and down completely randomly.

Pair Corralation between Sabio Holdings and NovaGold Resources

Assuming the 90 days trading horizon Sabio Holdings is expected to generate 1.7 times more return on investment than NovaGold Resources. However, Sabio Holdings is 1.7 times more volatile than NovaGold Resources. It trades about 0.03 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.02 per unit of risk. If you would invest  49.00  in Sabio Holdings on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Sabio Holdings or generate 2.04% return on investment over 90 days.

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

Sabio Holdings  vs.  NovaGold Resources

Sabio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Sabio Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NovaGold Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sabio Holdings and NovaGold Resources

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

The idea behind Sabio Holdings and NovaGold 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.