Correlation Between Fortitude Gold and NovaGold Resources

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

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

Diversification Opportunities for Fortitude Gold and NovaGold Resources

0.46

Correlation Coefficient

Fortitude Gold  NovaGold Resources

Very weak diversification

The 3 months correlation between Fortitude and NovaGold is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fortitude Gold Corp and NovaGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaGold Resources and Fortitude Gold 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 Fortitude Gold Corp 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 Fortitude Gold i.e., Fortitude Gold and NovaGold Resources go up and down completely randomly.

Pair Corralation between Fortitude Gold and NovaGold Resources

Given the investment horizon of 90 days Fortitude Gold Corp is expected to generate 0.62 times more return on investment than NovaGold Resources. However, Fortitude Gold Corp is 1.6 times less risky than NovaGold Resources. It trades about -0.04 of its potential returns per unit of risk. NovaGold Resources is currently generating about -0.05 per unit of risk. If you would invest  621.00  in Fortitude Gold Corp on February 6, 2024 and sell it today you would lose (129.00) from holding Fortitude Gold Corp or give up 20.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

Fortitude Gold Corp  vs.  NovaGold Resources

Fortitude Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortitude Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Fortitude Gold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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. Despite nearly weak technical and fundamental indicators, NovaGold Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortitude Gold and NovaGold Resources

The main advantage of trading using opposite Fortitude Gold and NovaGold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortitude Gold 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 Fortitude Gold Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.