Correlation Between NovaGold Resources and Western Investment
Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and Western Investment 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 Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NovaGold Resources and Western Investment, you can compare the effects of market volatilities on NovaGold Resources and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Western Investment.
Diversification Opportunities for NovaGold Resources and Western Investment
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NovaGold and Western is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Western Investment go up and down completely randomly.
Pair Corralation between NovaGold Resources and Western Investment
Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Western Investment. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 1.25 times less risky than Western Investment. The stock trades about 0.0 of its potential returns per unit of risk. The Western Investment is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 48.00 in Western Investment on September 3, 2024 and sell it today you would lose (4.00) from holding Western Investment or give up 8.33% 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. Western Investment
Performance |
| Timeline |
| NovaGold Resources |
| Western Investment |
NovaGold Resources and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NovaGold Resources and Western Investment
The main advantage of trading using opposite NovaGold Resources and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NovaGold Resources position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment'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 |
| Western Investment vs. Colliers International Group | Western Investment vs. Altus Group Limited | Western Investment vs. Harvest Global REIT | Western Investment vs. International Zeolite 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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