Correlation Between Agnico Eagle and NovaGold Resources
Can any of the company-specific risk be diversified away by investing in both Agnico Eagle 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 Agnico Eagle and NovaGold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agnico Eagle Mines and NovaGold Resources, you can compare the effects of market volatilities on Agnico Eagle 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 Agnico Eagle with a short position of NovaGold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and NovaGold Resources.
Diversification Opportunities for Agnico Eagle and NovaGold Resources
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Agnico and NovaGold is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Agnico Eagle 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 Agnico Eagle Mines 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 Agnico Eagle i.e., Agnico Eagle and NovaGold Resources go up and down completely randomly.
Pair Corralation between Agnico Eagle and NovaGold Resources
Considering the 90-day investment horizon Agnico Eagle is expected to generate 1.2 times less return on investment than NovaGold Resources. But when comparing it to its historical volatility, Agnico Eagle Mines is 2.59 times less risky than NovaGold Resources. It trades about 0.34 of its potential returns per unit of risk. NovaGold Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 257.00 in NovaGold Resources on January 25, 2024 and sell it today you would earn a total of 36.00 from holding NovaGold Resources or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Agnico Eagle Mines vs. NovaGold Resources
Performance |
| Timeline |
| Agnico Eagle Mines |
| NovaGold Resources |
Agnico Eagle and NovaGold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Agnico Eagle and NovaGold Resources
The main advantage of trading using opposite Agnico Eagle and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle 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' long position.The idea behind Agnico Eagle Mines 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.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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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