Correlation Between AGF Management and NovaGold Resources

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

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

Diversification Opportunities for AGF Management and NovaGold Resources

-0.75

Correlation Coefficient

AGF Management  NovaGold Resources

Pay attention - limited upside

The 3 months correlation between AGF and NovaGold is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and AGF Management 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 AGF Management Limited 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 AGF Management i.e., AGF Management and NovaGold Resources go up and down completely randomly.

Pair Corralation between AGF Management and NovaGold Resources

Assuming the 90 days trading horizon AGF Management Limited is expected to generate 0.64 times more return on investment than NovaGold Resources. However, AGF Management Limited is 1.57 times less risky than NovaGold Resources. It trades about 0.27 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.02 per unit of risk. If you would invest  782.00  in AGF Management Limited on September 3, 2024 and sell it today you would earn a total of  320.00  from holding AGF Management Limited or generate 40.92% return on investment over 90 days.

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

AGF Management Limited  vs.  NovaGold Resources

AGF Management

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AGF Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of very healthy basic indicators, NovaGold Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AGF Management and NovaGold Resources

The main advantage of trading using opposite AGF Management and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGF Management 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 AGF Management Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.