Correlation Between NovaGold Resources and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both NovaGold Resources and Kaiser Aluminum 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 Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NovaGold Resources and Kaiser Aluminum, you can compare the effects of market volatilities on NovaGold Resources and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Kaiser Aluminum.
Diversification Opportunities for NovaGold Resources and Kaiser Aluminum
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NovaGold and Kaiser is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between NovaGold Resources and Kaiser Aluminum
Allowing for the 90-day total investment horizon NovaGold Resources is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, NovaGold Resources is 1.27 times less risky than Kaiser Aluminum. The stock trades about -0.11 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 7,071 in Kaiser Aluminum on August 23, 2024 and sell it today you would earn a total of 1,047 from holding Kaiser Aluminum or generate 14.81% 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. Kaiser Aluminum
Performance |
| Timeline |
| NovaGold Resources |
| Kaiser Aluminum |
NovaGold Resources and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NovaGold Resources and Kaiser Aluminum
The main advantage of trading using opposite NovaGold Resources and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NovaGold Resources position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| NovaGold Resources vs. Agnico Eagle Mines | NovaGold Resources vs. Pan American Silver | NovaGold Resources vs. Kinross Gold | NovaGold Resources vs. B2Gold Corp |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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