Correlation Between NovaGold Resources and Barrick Gold

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

By analyzing existing cross correlation between NovaGold Resources and Barrick Gold Corp, you can compare the effects of market volatilities on NovaGold Resources and Barrick Gold 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 Barrick Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of NovaGold Resources and Barrick Gold.

Diversification Opportunities for NovaGold Resources and Barrick Gold

0.95

Correlation Coefficient

NovaGold Resources  Barrick Gold

Almost no diversification

The 3 months correlation between NovaGold and Barrick is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NovaGold Resources and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold Corp 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 Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of NovaGold Resources i.e., NovaGold Resources and Barrick Gold go up and down completely randomly.

Pair Corralation between NovaGold Resources and Barrick Gold

Assuming the 90 days horizon NovaGold Resources is expected to under-perform the Barrick Gold. In addition to that, NovaGold Resources is 1.85 times more volatile than Barrick Gold Corp. It trades about -0.06 of its total potential returns per unit of risk. Barrick Gold Corp is currently generating about -0.02 per unit of volatility. If you would invest  2,602  in Barrick Gold Corp on February 3, 2024 and sell it today you would lose (336.00) from holding Barrick Gold Corp or give up 12.91% of portfolio value over 90 days.

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

NovaGold Resources  vs.  Barrick Gold Corp

NovaGold Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NovaGold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NovaGold Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Barrick Gold Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Barrick Gold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with NovaGold Resources and Barrick Gold

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

The idea behind NovaGold Resources and Barrick Gold Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.