Correlation Between New Gold and Nova Minerals

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

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

Diversification Opportunities for New Gold and Nova Minerals

-0.06

Correlation Coefficient

New Gold  Nova Minerals

Good diversification

The 3 months correlation between New and Nova is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited and New 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 New Gold are associated (or correlated) with Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of New Gold i.e., New Gold and Nova Minerals go up and down completely randomly.

Pair Corralation between New Gold and Nova Minerals

Considering the 90-day investment horizon New Gold is expected to generate 2.35 times less return on investment than Nova Minerals. But when comparing it to its historical volatility, New Gold is 1.72 times less risky than Nova Minerals. It trades about 0.1 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Nova Minerals Limited on September 4, 2024 and sell it today you would earn a total of  422.00  from holding Nova Minerals Limited or generate 87.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.65%
Values	Daily Returns

New Gold  vs.  Nova Minerals Limited

New Gold

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, New Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nova Minerals Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Nova Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Gold and Nova Minerals

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

The idea behind New Gold and Nova Minerals Limited 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.