Correlation Between Novo Resources and Lion One
Can any of the company-specific risk be diversified away by investing in both Novo Resources and Lion One 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 Lion One 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 Lion One Metals, you can compare the effects of market volatilities on Novo Resources and Lion One 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 Lion One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Resources and Lion One.
Diversification Opportunities for Novo Resources and Lion One
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Novo and Lion is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Novo Resources i.e., Novo Resources and Lion One go up and down completely randomly.
Pair Corralation between Novo Resources and Lion One
Assuming the 90 days trading horizon Novo Resources is expected to generate 1.05 times less return on investment than Lion One. But when comparing it to its historical volatility, Novo Resources Corp is 1.4 times less risky than Lion One. It trades about 0.24 of its potential returns per unit of risk. Lion One Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Lion One Metals on October 20, 2024 and sell it today you would earn a total of 5.00 from holding Lion One Metals or generate 19.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Novo Resources Corp vs. Lion One Metals
Performance |
| Timeline |
| Novo Resources Corp |
| Lion One Metals |
Novo Resources and Lion One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Resources and Lion One
The main advantage of trading using opposite Novo Resources and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Resources position performs unexpectedly, Lion One 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 Lion One will offset losses from the drop in Lion One's long position.| Novo Resources vs. Lion One Metals | Novo Resources vs. New Found Gold | Novo Resources vs. Eskay Mining Corp | Novo Resources vs. Labrador Gold 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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