Correlation Between NovaGold Resources and IAMGold
Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and IAMGold 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 IAMGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NovaGold Resources and IAMGold, you can compare the effects of market volatilities on NovaGold Resources and IAMGold 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 IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and IAMGold.
Diversification Opportunities for NovaGold Resources and IAMGold
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NovaGold and IAMGold is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold 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 IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and IAMGold go up and down completely randomly.
Pair Corralation between NovaGold Resources and IAMGold
Assuming the 90 days horizon NovaGold Resources is expected to generate 0.75 times more return on investment than IAMGold. However, NovaGold Resources is 1.34 times less risky than IAMGold. It trades about -0.02 of its potential returns per unit of risk. IAMGold is currently generating about -0.03 per unit of risk. If you would invest 505.00 in NovaGold Resources on August 28, 2024 and sell it today you would lose (10.00) from holding NovaGold Resources or give up 1.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NovaGold Resources vs. IAMGold
Performance |
| Timeline |
| NovaGold Resources |
| IAMGold |
NovaGold Resources and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NovaGold Resources and IAMGold
The main advantage of trading using opposite NovaGold Resources and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NovaGold Resources position performs unexpectedly, IAMGold 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 IAMGold will offset losses from the drop in IAMGold's long position.The idea behind NovaGold Resources and IAMGold 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.| IAMGold vs. Eldorado Gold Corp | IAMGold vs. Kinross Gold Corp | IAMGold vs. Alamos Gold | IAMGold vs. New Gold |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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