Correlation Between South32 and Novo Resources
Can any of the company-specific risk be diversified away by investing in both South32 and Novo 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 South32 and Novo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Novo Resources Corp, you can compare the effects of market volatilities on South32 and Novo 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 South32 with a short position of Novo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Novo Resources.
Diversification Opportunities for South32 and Novo Resources
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between South32 and Novo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Novo Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Resources Corp and South32 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 South32 Limited are associated (or correlated) with Novo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Resources Corp has no effect on the direction of South32 i.e., South32 and Novo Resources go up and down completely randomly.
Pair Corralation between South32 and Novo Resources
Assuming the 90 days horizon South32 Limited is expected to under-perform the Novo Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, South32 Limited is 1.75 times less risky than Novo Resources. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Novo Resources Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5.05 in Novo Resources Corp on December 1, 2024 and sell it today you would earn a total of 1.00 from holding Novo Resources Corp or generate 19.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
South32 Limited vs. Novo Resources Corp
Performance |
Timeline |
South32 Limited |
Novo Resources Corp |
South32 and Novo Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with South32 and Novo Resources
The main advantage of trading using opposite South32 and Novo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, Novo 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 Novo Resources will offset losses from the drop in Novo Resources' long position.South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
Novo Resources vs. Lion One Metals | Novo Resources vs. Irving Resources | Novo Resources vs. Eloro Resources | Novo Resources vs. Eskay Mining Corp |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |