Correlation Between Novo Resources and Matador Mining

Can any of the company-specific risk be diversified away by investing in both Novo Resources and Matador Mining 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 Matador Mining 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 Matador Mining Limited, you can compare the effects of market volatilities on Novo Resources and Matador Mining 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 Matador Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Resources and Matador Mining.

Diversification Opportunities for Novo Resources and Matador Mining

0.07

Correlation Coefficient

Novo Resources  Matador Mining

Significant diversification

The 3 months correlation between Novo and Matador is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Novo Resources Corp and Matador Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Mining 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 Matador Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matador Mining has no effect on the direction of Novo Resources i.e., Novo Resources and Matador Mining go up and down completely randomly.

Pair Corralation between Novo Resources and Matador Mining

Assuming the 90 days horizon Novo Resources Corp is expected to under-perform the Matador Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, Novo Resources Corp is 3.92 times less risky than Matador Mining. The otc stock trades about -0.03 of its potential returns per unit of risk. The Matador Mining Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.04  in Matador Mining Limited on September 12, 2024 and sell it today you would lose (1.56) from holding Matador Mining Limited or give up 19.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.79%
Values	Daily Returns

Novo Resources Corp  vs.  Matador Mining Limited

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.

Matador Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matador Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Matador Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Novo Resources and Matador Mining

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

The idea behind Novo Resources Corp and Matador Mining 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.