Correlation Between Novo Resources and Golden Minerals

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

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

Diversification Opportunities for Novo Resources and Golden Minerals

0.36

Correlation Coefficient

Novo Resources  Golden Minerals

Weak diversification

The 3 months correlation between Novo and Golden is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Golden Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Minerals and Novo Resources 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 Novo Resources Corp are associated (or correlated) with Golden Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Minerals has no effect on the direction of Novo Resources i.e., Novo Resources and Golden Minerals go up and down completely randomly.

Pair Corralation between Novo Resources and Golden Minerals

Assuming the 90 days horizon Novo Resources Corp is expected to under-perform the Golden Minerals. But the otc stock apears to be less risky and, when comparing its historical volatility, Novo Resources Corp is 1.33 times less risky than Golden Minerals. The otc stock trades about -0.03 of its potential returns per unit of risk. The Golden Minerals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Golden Minerals on September 12, 2024 and sell it today you would lose (4.00) from holding Golden Minerals or give up 14.81% of portfolio value over 90 days.

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

Novo Resources Corp  vs.  Golden Minerals

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.

Golden Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Golden Minerals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Novo Resources and Golden Minerals

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

The idea behind Novo Resources Corp and Golden Minerals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.