Correlation Between NovaGold Resources and Wheaton Precious

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

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

Diversification Opportunities for NovaGold Resources and Wheaton Precious

0.84

Correlation Coefficient

NovaGold Resources  Wheaton Precious

Very poor diversification

The 3 months correlation between NovaGold and Wheaton is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals and NovaGold 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 NovaGold Resources are associated (or correlated) with Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Wheaton Precious go up and down completely randomly.

Pair Corralation between NovaGold Resources and Wheaton Precious

Allowing for the 90-day total investment horizon NovaGold Resources is expected to generate 2.35 times more return on investment than Wheaton Precious. However, NovaGold Resources is 2.35 times more volatile than Wheaton Precious Metals. It trades about 0.34 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.36 per unit of risk. If you would invest  281.00  in NovaGold Resources on February 20, 2024 and sell it today you would earn a total of  68.00  from holding NovaGold Resources or generate 24.2% return on investment over 90 days.

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

NovaGold Resources  vs.  Wheaton Precious Metals

NovaGold Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NovaGold Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, NovaGold Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Wheaton Precious Metals

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NovaGold Resources and Wheaton Precious

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

The idea behind NovaGold Resources and Wheaton Precious Metals 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.