Correlation Between First Mining and Novo Resources
Can any of the company-specific risk be diversified away by investing in both First Mining 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 First Mining and Novo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Mining Gold and Novo Resources Corp, you can compare the effects of market volatilities on First Mining 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 First Mining with a short position of Novo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Mining and Novo Resources.
Diversification Opportunities for First Mining and Novo Resources
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Novo is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Mining Gold 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 First Mining 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 First Mining Gold 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 First Mining i.e., First Mining and Novo Resources go up and down completely randomly.
Pair Corralation between First Mining and Novo Resources
Assuming the 90 days horizon First Mining Gold is expected to under-perform the Novo Resources. But the stock apears to be less risky and, when comparing its historical volatility, First Mining Gold is 1.29 times less risky than Novo Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Novo Resources Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Novo Resources Corp on October 20, 2024 and sell it today you would earn a total of 1.50 from holding Novo Resources Corp or generate 18.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Mining Gold vs. Novo Resources Corp
Performance |
| Timeline |
| First Mining Gold |
| Novo Resources Corp |
First Mining and Novo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Mining and Novo Resources
The main advantage of trading using opposite First Mining and Novo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Mining 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.The idea behind First Mining Gold and Novo Resources Corp 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.| Novo Resources vs. Lion One Metals | Novo Resources vs. New Found Gold | Novo Resources vs. Eskay Mining Corp | Novo Resources vs. Labrador Gold 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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