Correlation Between Sprott Physical and NovaGold Resources

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

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

Diversification Opportunities for Sprott Physical and NovaGold Resources

-0.17

Correlation Coefficient

Sprott Physical  NovaGold Resources

Good diversification

The 3 months correlation between Sprott and NovaGold is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Physical Platinum and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Sprott Physical 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 Sprott Physical Platinum 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 Sprott Physical i.e., Sprott Physical and NovaGold Resources go up and down completely randomly.

Pair Corralation between Sprott Physical and NovaGold Resources

Assuming the 90 days trading horizon Sprott Physical Platinum is expected to generate 0.33 times more return on investment than NovaGold Resources. However, Sprott Physical Platinum is 2.99 times less risky than NovaGold Resources. It trades about 0.15 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.04 per unit of risk. If you would invest  1,269  in Sprott Physical Platinum on December 30, 2024 and sell it today you would earn a total of  127.00  from holding Sprott Physical Platinum or generate 10.01% return on investment over 90 days.

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

Sprott Physical Platinum  vs.  NovaGold Resources

Sprott Physical Platinum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Platinum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Sprott Physical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NovaGold Resources

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sprott Physical and NovaGold Resources

The main advantage of trading using opposite Sprott Physical and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Physical 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 Sprott Physical Platinum 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.