Correlation Between AUST AGRICULTURAL and NOVAGOLD RESOURCES
Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL 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 AUST AGRICULTURAL and NOVAGOLD RESOURCES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUST AGRICULTURAL and NOVAGOLD RESOURCES, you can compare the effects of market volatilities on AUST AGRICULTURAL 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 AUST AGRICULTURAL with a short position of NOVAGOLD RESOURCES. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and NOVAGOLD RESOURCES.
Diversification Opportunities for AUST AGRICULTURAL and NOVAGOLD RESOURCES
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AUST and NOVAGOLD is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and NOVAGOLD RESOURCES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAGOLD RESOURCES and AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL i.e., AUST AGRICULTURAL and NOVAGOLD RESOURCES go up and down completely randomly.
Pair Corralation between AUST AGRICULTURAL and NOVAGOLD RESOURCES
Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to generate 0.22 times more return on investment than NOVAGOLD RESOURCES. However, AUST AGRICULTURAL is 4.58 times less risky than NOVAGOLD RESOURCES. It trades about -0.08 of its potential returns per unit of risk. NOVAGOLD RESOURCES is currently generating about -0.1 per unit of risk. If you would invest 83.00 in AUST AGRICULTURAL on September 24, 2024 and sell it today you would lose (1.00) from holding AUST AGRICULTURAL or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUST AGRICULTURAL vs. NOVAGOLD RESOURCES
Performance |
| Timeline |
| AUST AGRICULTURAL |
| NOVAGOLD RESOURCES |
AUST AGRICULTURAL and NOVAGOLD RESOURCES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUST AGRICULTURAL and NOVAGOLD RESOURCES
The main advantage of trading using opposite AUST AGRICULTURAL and NOVAGOLD RESOURCES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL 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's long position.| AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc | AUST AGRICULTURAL vs. Apple Inc |
| NOVAGOLD RESOURCES vs. Ubisoft Entertainment SA | NOVAGOLD RESOURCES vs. Granite Construction | NOVAGOLD RESOURCES vs. AUST AGRICULTURAL | NOVAGOLD RESOURCES vs. Federal Agricultural Mortgage |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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