Correlation Between Agnico Eagle and NovaGold Resources

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and NovaGold 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 Agnico Eagle and NovaGold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agnico Eagle Mines and NovaGold Resources, you can compare the effects of market volatilities on Agnico Eagle and NovaGold 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 Agnico Eagle with a short position of NovaGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and NovaGold Resources.

Diversification Opportunities for Agnico Eagle and NovaGold Resources

0.15

Correlation Coefficient

Agnico Eagle  NovaGold Resources

Average diversification

The 3 months correlation between Agnico and NovaGold is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with NovaGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaGold Resources has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and NovaGold Resources go up and down completely randomly.

Pair Corralation between Agnico Eagle and NovaGold Resources

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 0.53 times more return on investment than NovaGold Resources. However, Agnico Eagle Mines is 1.89 times less risky than NovaGold Resources. It trades about 0.11 of its potential returns per unit of risk. NovaGold Resources is currently generating about 0.01 per unit of risk. If you would invest  4,477  in Agnico Eagle Mines on September 12, 2024 and sell it today you would earn a total of  4,133  from holding Agnico Eagle Mines or generate 92.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Agnico Eagle Mines  vs.  NovaGold Resources

Agnico Eagle Mines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Agnico Eagle is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NovaGold Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NovaGold Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Agnico Eagle and NovaGold Resources

The main advantage of trading using opposite Agnico Eagle and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle position performs unexpectedly, NovaGold 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 NovaGold Resources will offset losses from the drop in NovaGold Resources' long position.

The idea behind Agnico Eagle Mines and NovaGold Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.