Correlation Between NovaGold Resources and Black Iron
Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and Black Iron 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 NovaGold Resources and Black Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NovaGold Resources and Black Iron, you can compare the effects of market volatilities on NovaGold Resources and Black Iron 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 NovaGold Resources with a short position of Black Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Black Iron.
Diversification Opportunities for NovaGold Resources and Black Iron
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NovaGold and Black is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Black Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Iron and NovaGold Resources 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 NovaGold Resources are associated (or correlated) with Black Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Iron has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Black Iron go up and down completely randomly.
Pair Corralation between NovaGold Resources and Black Iron
Assuming the 90 days horizon NovaGold Resources is expected to generate 13.88 times less return on investment than Black Iron. But when comparing it to its historical volatility, NovaGold Resources is 10.93 times less risky than Black Iron. It trades about 0.12 of its potential returns per unit of risk. Black Iron is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Black Iron on September 3, 2024 and sell it today you would earn a total of 3.00 from holding Black Iron or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NovaGold Resources vs. Black Iron
Performance |
| Timeline |
| NovaGold Resources |
| Black Iron |
NovaGold Resources and Black Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NovaGold Resources and Black Iron
The main advantage of trading using opposite NovaGold Resources and Black Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NovaGold Resources position performs unexpectedly, Black Iron 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 Black Iron will offset losses from the drop in Black Iron's long position.| NovaGold Resources vs. Algoma Steel Group | NovaGold Resources vs. Champion Iron | NovaGold Resources vs. International Zeolite Corp | NovaGold Resources vs. European Residential Real |
| Black Iron vs. Northcliff Resources | Black Iron vs. St Augustine Gold | Black Iron vs. Mammoth Resources Corp | Black Iron vs. Black Widow Resources |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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