Correlation Between G-III APPAREL and NOVAGOLD RESOURCES

Can any of the company-specific risk be diversified away by investing in both G-III APPAREL 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 G-III APPAREL and NOVAGOLD RESOURCES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G III APPAREL GROUP and NOVAGOLD RESOURCES, you can compare the effects of market volatilities on G-III APPAREL 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 G-III APPAREL with a short position of NOVAGOLD RESOURCES. Check out your portfolio center. Please also check ongoing floating volatility patterns of G-III APPAREL and NOVAGOLD RESOURCES.

Diversification Opportunities for G-III APPAREL and NOVAGOLD RESOURCES

-0.65

Correlation Coefficient

G-III APPAREL  NOVAGOLD RESOURCES

Excellent diversification

The 3 months correlation between G-III and NOVAGOLD is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding G III APPAREL GROUP and NOVAGOLD RESOURCES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAGOLD RESOURCES and G-III APPAREL 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 G III APPAREL GROUP 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 G-III APPAREL i.e., G-III APPAREL and NOVAGOLD RESOURCES go up and down completely randomly.

Pair Corralation between G-III APPAREL and NOVAGOLD RESOURCES

Assuming the 90 days trading horizon G III APPAREL GROUP is expected to generate 1.03 times more return on investment than NOVAGOLD RESOURCES. However, G-III APPAREL is 1.03 times more volatile than NOVAGOLD RESOURCES. It trades about 0.09 of its potential returns per unit of risk. NOVAGOLD RESOURCES is currently generating about -0.05 per unit of risk. If you would invest  1,470  in G III APPAREL GROUP on February 3, 2024 and sell it today you would earn a total of  1,190  from holding G III APPAREL GROUP or generate 80.95% return on investment over 90 days.

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

G III APPAREL GROUP  vs.  NOVAGOLD RESOURCES

G III APPAREL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G III APPAREL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, G-III APPAREL is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NOVAGOLD RESOURCES

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOVAGOLD RESOURCES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, NOVAGOLD RESOURCES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G-III APPAREL and NOVAGOLD RESOURCES

The main advantage of trading using opposite G-III APPAREL and NOVAGOLD RESOURCES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III APPAREL 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's long position.

The idea behind G III APPAREL GROUP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.