Correlation Between Faraday Copper and NovaGold Resources
Can any of the company-specific risk be diversified away by investing in both Faraday Copper 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 Faraday Copper and NovaGold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Copper Corp and NovaGold Resources, you can compare the effects of market volatilities on Faraday Copper 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 Faraday Copper with a short position of NovaGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and NovaGold Resources.
Diversification Opportunities for Faraday Copper and NovaGold Resources
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Faraday and NovaGold is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Faraday Copper 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 Faraday Copper Corp 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 Faraday Copper i.e., Faraday Copper and NovaGold Resources go up and down completely randomly.
Pair Corralation between Faraday Copper and NovaGold Resources
Assuming the 90 days trading horizon Faraday Copper Corp is expected to under-perform the NovaGold Resources. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Copper Corp is 1.31 times less risky than NovaGold Resources. The stock trades about -0.07 of its potential returns per unit of risk. The NovaGold Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 505.00 in NovaGold Resources on August 28, 2024 and sell it today you would lose (2.00) from holding NovaGold Resources or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Copper Corp vs. NovaGold Resources
Performance |
| Timeline |
| Faraday Copper Corp |
| NovaGold Resources |
Faraday Copper and NovaGold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Copper and NovaGold Resources
The main advantage of trading using opposite Faraday Copper and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper 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 Faraday Copper Corp 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.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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