Correlation Between Novo Resources and Red Pine
Can any of the company-specific risk be diversified away by investing in both Novo Resources and Red Pine 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 Novo Resources and Red Pine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novo Resources Corp and Red Pine Exploration, you can compare the effects of market volatilities on Novo Resources and Red Pine 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 Novo Resources with a short position of Red Pine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Resources and Red Pine.
Diversification Opportunities for Novo Resources and Red Pine
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Novo and Red is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration and Novo 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 Novo Resources Corp are associated (or correlated) with Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of Novo Resources i.e., Novo Resources and Red Pine go up and down completely randomly.
Pair Corralation between Novo Resources and Red Pine
Assuming the 90 days horizon Novo Resources Corp is expected to generate 1.33 times more return on investment than Red Pine. However, Novo Resources is 1.33 times more volatile than Red Pine Exploration. It trades about 0.02 of its potential returns per unit of risk. Red Pine Exploration is currently generating about 0.01 per unit of risk. If you would invest 6.51 in Novo Resources Corp on November 7, 2024 and sell it today you would lose (0.21) from holding Novo Resources Corp or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Novo Resources Corp vs. Red Pine Exploration
Performance |
| Timeline |
| Novo Resources Corp |
| Red Pine Exploration |
Novo Resources and Red Pine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Resources and Red Pine
The main advantage of trading using opposite Novo Resources and Red Pine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Resources position performs unexpectedly, Red Pine 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 Red Pine will offset losses from the drop in Red Pine's long position.| Novo Resources vs. Lion One Metals | Novo Resources vs. Irving Resources | Novo Resources vs. Eloro Resources | Novo Resources vs. Eskay Mining Corp |
| Red Pine vs. Endurance Gold | Red Pine vs. Altamira Gold Corp | Red Pine vs. Grande Portage Resources | Red Pine vs. Tectonic Metals |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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