Correlation Between NovaGold Resources and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and Loblaw Companies 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 Loblaw Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NovaGold Resources and Loblaw Companies Limited, you can compare the effects of market volatilities on NovaGold Resources and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Loblaw Companies.
Diversification Opportunities for NovaGold Resources and Loblaw Companies
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between NovaGold and Loblaw is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Loblaw Companies go up and down completely randomly.
Pair Corralation between NovaGold Resources and Loblaw Companies
Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Loblaw Companies. In addition to that, NovaGold Resources is 2.04 times more volatile than Loblaw Companies Limited. It trades about -0.16 of its total potential returns per unit of risk. Loblaw Companies Limited is currently generating about -0.17 per unit of volatility. If you would invest 19,022 in Loblaw Companies Limited on November 3, 2024 and sell it today you would lose (824.00) from holding Loblaw Companies Limited or give up 4.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NovaGold Resources vs. Loblaw Companies Limited
Performance |
| Timeline |
| NovaGold Resources |
| Loblaw Companies |
NovaGold Resources and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NovaGold Resources and Loblaw Companies
The main advantage of trading using opposite NovaGold Resources and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NovaGold Resources position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| NovaGold Resources vs. Centerra Gold | NovaGold Resources vs. Alamos Gold | NovaGold Resources vs. MAG Silver Corp | NovaGold Resources vs. Seabridge Gold |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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