Correlation Between Galiano Gold and NovaGold Resources

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

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

Diversification Opportunities for Galiano Gold and NovaGold Resources

0.11

Correlation Coefficient

Galiano Gold  NovaGold Resources

Average diversification

The 3 months correlation between Galiano and NovaGold is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Galiano Gold and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Galiano Gold 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 Galiano Gold 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 Galiano Gold i.e., Galiano Gold and NovaGold Resources go up and down completely randomly.

Pair Corralation between Galiano Gold and NovaGold Resources

Considering the 90-day investment horizon Galiano Gold is expected to generate 0.98 times more return on investment than NovaGold Resources. However, Galiano Gold is 1.02 times less risky than NovaGold Resources. It trades about -0.05 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.09 per unit of risk. If you would invest  153.00  in Galiano Gold on September 13, 2024 and sell it today you would lose (20.50) from holding Galiano Gold or give up 13.4% of portfolio value over 90 days.

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

Galiano Gold  vs.  NovaGold Resources

Galiano Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galiano Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 unfluctuating 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 Galiano Gold and NovaGold Resources

The main advantage of trading using opposite Galiano Gold and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galiano Gold 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 Galiano Gold 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.