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 |
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 is expected to generate 1.5 times less return on investment than NovaGold Resources. But when comparing it to its historical volatility, AngloGold Ashanti plc is 1.51 times less risky than NovaGold Resources. It trades about 0.08 of its potential returns per unit of risk. NovaGold Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 276.00 in NovaGold Resources on January 27, 2024 and sell it today you would earn a total of 14.00 from holding NovaGold Resources or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
AngloGold Ashanti plc vs. NovaGold Resources
Performance |
| Timeline |
| AngloGold Ashanti plc |
| NovaGold Resources |
AngloGold Ashanti and NovaGold Resources Volatility Contrast
Predicted Return Density |
| Returns |
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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |