Correlation Between AngloGold Ashanti and NovaGold Resources

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

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

Diversification Opportunities for AngloGold Ashanti and NovaGold Resources

0.51

Correlation Coefficient

AngloGold Ashanti  NovaGold Resources

Very weak diversification

The 3 months correlation between AngloGold and NovaGold is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and AngloGold Ashanti 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 AngloGold Ashanti plc 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 AngloGold Ashanti i.e., AngloGold Ashanti and NovaGold Resources go up and down completely randomly.

Pair Corralation between AngloGold Ashanti and NovaGold Resources

Allowing for the 90-day total investment horizon AngloGold Ashanti plc is expected to generate 0.83 times more return on investment than NovaGold Resources. However, AngloGold Ashanti plc is 1.2 times less risky than NovaGold Resources. It trades about 0.05 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.04 per unit of risk. If you would invest  1,902  in AngloGold Ashanti plc on January 25, 2024 and sell it today you would earn a total of  289.00  from holding AngloGold Ashanti plc or generate 15.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

AngloGold Ashanti plc  vs.  NovaGold Resources

AngloGold Ashanti plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AngloGold Ashanti plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AngloGold Ashanti unveiled solid returns over the last few months and may actually be approaching a breakup point.

NovaGold Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NovaGold Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, NovaGold Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AngloGold Ashanti and NovaGold Resources

The main advantage of trading using opposite AngloGold Ashanti and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AngloGold Ashanti 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 AngloGold Ashanti plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.