Correlation Between Bear Creek and Novo Resources

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

By analyzing existing cross correlation between Bear Creek Mining and Novo Resources Corp, you can compare the effects of market volatilities on Bear Creek 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 Bear Creek with a short position of Novo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bear Creek and Novo Resources.

Diversification Opportunities for Bear Creek and Novo Resources

0.5

Correlation Coefficient

Bear Creek  Novo Resources

Very weak diversification

The 3 months correlation between Bear and Novo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bear Creek Mining 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 Bear Creek 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 Bear Creek Mining 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 Bear Creek i.e., Bear Creek and Novo Resources go up and down completely randomly.

Pair Corralation between Bear Creek and Novo Resources

Assuming the 90 days horizon Bear Creek Mining is expected to generate 1.18 times more return on investment than Novo Resources. However, Bear Creek is 1.18 times more volatile than Novo Resources Corp. It trades about 0.02 of its potential returns per unit of risk. Novo Resources Corp is currently generating about -0.04 per unit of risk. If you would invest  41.00  in Bear Creek Mining on September 12, 2024 and sell it today you would lose (11.00) from holding Bear Creek Mining or give up 26.83% of portfolio value over 90 days.

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

Bear Creek Mining  vs.  Novo Resources Corp

Bear Creek Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bear Creek Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Bear Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Novo Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novo Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bear Creek and Novo Resources

The main advantage of trading using opposite Bear Creek and Novo Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bear Creek 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.

The idea behind Bear Creek Mining and Novo Resources Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.