Correlation Between Sterling Metals and Novo Resources
Can any of the company-specific risk be diversified away by investing in both Sterling Metals and Novo Resources 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 Sterling Metals and Novo Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Metals Corp and Novo Resources Corp, you can compare the effects of market volatilities on Sterling Metals and Novo Resources 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 Sterling Metals with a short position of Novo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Metals and Novo Resources.
Diversification Opportunities for Sterling Metals and Novo Resources
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sterling and Novo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Metals Corp and Novo Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Resources Corp and Sterling Metals 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 Sterling Metals Corp are associated (or correlated) with Novo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Resources Corp has no effect on the direction of Sterling Metals i.e., Sterling Metals and Novo Resources go up and down completely randomly.
Pair Corralation between Sterling Metals and Novo Resources
Assuming the 90 days horizon Sterling Metals Corp is expected to under-perform the Novo Resources. In addition to that, Sterling Metals is 1.91 times more volatile than Novo Resources Corp. It trades about -0.19 of its total potential returns per unit of risk. Novo Resources Corp is currently generating about -0.34 per unit of volatility. If you would invest 6.85 in Novo Resources Corp on September 1, 2024 and sell it today you would lose (1.65) from holding Novo Resources Corp or give up 24.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sterling Metals Corp vs. Novo Resources Corp
Performance |
| Timeline |
| Sterling Metals Corp |
| Novo Resources Corp |
Sterling Metals and Novo Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Metals and Novo Resources
The main advantage of trading using opposite Sterling Metals and Novo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Metals position performs unexpectedly, Novo Resources 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 Novo Resources will offset losses from the drop in Novo Resources' long position.| Sterling Metals vs. Progressive Planet Solutions | Sterling Metals vs. Durango Resources | Sterling Metals vs. Avarone Metals | Sterling Metals vs. Mundoro Capital |
| Novo Resources vs. South32 Limited | Novo Resources vs. NioCorp Developments Ltd | Novo Resources vs. HUMANA INC | Novo Resources vs. SCOR PK |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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