Correlation Between NOVAGOLD RESOURCES and SMA Solar

Can any of the company-specific risk be diversified away by investing in both NOVAGOLD RESOURCES and SMA Solar 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 SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NOVAGOLD RESOURCES and SMA Solar Technology, you can compare the effects of market volatilities on NOVAGOLD RESOURCES and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVAGOLD RESOURCES and SMA Solar.

Diversification Opportunities for NOVAGOLD RESOURCES and SMA Solar

-0.52

Correlation Coefficient

NOVAGOLD RESOURCES  SMA Solar

Excellent diversification

The 3 months correlation between NOVAGOLD and SMA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NOVAGOLD RESOURCES and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of NOVAGOLD RESOURCES i.e., NOVAGOLD RESOURCES and SMA Solar go up and down completely randomly.

Pair Corralation between NOVAGOLD RESOURCES and SMA Solar

Assuming the 90 days trading horizon NOVAGOLD RESOURCES is expected to under-perform the SMA Solar. In addition to that, NOVAGOLD RESOURCES is 1.41 times more volatile than SMA Solar Technology. It trades about -0.1 of its total potential returns per unit of risk. SMA Solar Technology is currently generating about -0.03 per unit of volatility. If you would invest  5,030  in SMA Solar Technology on February 1, 2024 and sell it today you would lose (106.00) from holding SMA Solar Technology or give up 2.11% of portfolio value over 90 days.

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

NOVAGOLD RESOURCES  vs.  SMA Solar Technology

NOVAGOLD RESOURCES

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOVAGOLD RESOURCES are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, NOVAGOLD RESOURCES exhibited solid returns over the last few months and may actually be approaching a breakup point.

SMA Solar Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SMA Solar may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with NOVAGOLD RESOURCES and SMA Solar

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

The idea behind NOVAGOLD RESOURCES and SMA Solar Technology 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.