Correlation Between Nova Minerals and Northern Dynasty

Can any of the company-specific risk be diversified away by investing in both Nova Minerals and Northern Dynasty 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 Nova Minerals and Northern Dynasty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nova Minerals Limited and Northern Dynasty Minerals, you can compare the effects of market volatilities on Nova Minerals and Northern Dynasty 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 Nova Minerals with a short position of Northern Dynasty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Minerals and Northern Dynasty.

Diversification Opportunities for Nova Minerals and Northern Dynasty

0.75

Correlation Coefficient

Nova Minerals  Northern Dynasty

Poor diversification

The 3 months correlation between Nova and Northern is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nova Minerals Limited and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals and Nova Minerals 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 Nova Minerals Limited are associated (or correlated) with Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of Nova Minerals i.e., Nova Minerals and Northern Dynasty go up and down completely randomly.

Pair Corralation between Nova Minerals and Northern Dynasty

Considering the 90-day investment horizon Nova Minerals Limited is expected to generate 1.2 times more return on investment than Northern Dynasty. However, Nova Minerals is 1.2 times more volatile than Northern Dynasty Minerals. It trades about 0.42 of its potential returns per unit of risk. Northern Dynasty Minerals is currently generating about 0.13 per unit of risk. If you would invest  816.00  in Nova Minerals Limited on September 23, 2024 and sell it today you would earn a total of  444.00  from holding Nova Minerals Limited or generate 54.41% return on investment over 90 days.

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

Nova Minerals Limited  vs.  Northern Dynasty Minerals

Nova Minerals Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nova Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Northern Dynasty Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Dynasty Minerals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Northern Dynasty disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Minerals and Northern Dynasty

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

The idea behind Nova Minerals Limited and Northern Dynasty Minerals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.