Correlation Between Novagold Resources and Dupont Denemours

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Can any of the company-specific risk be diversified away by investing in both Novagold Resources and Dupont Denemours 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 Dupont Denemours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novagold Resources and Dupont Denemours, you can compare the effects of market volatilities on Novagold Resources and Dupont Denemours 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 Dupont Denemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novagold Resources and Dupont Denemours.

Diversification Opportunities for Novagold Resources and Dupont Denemours

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Novagold and Dupont is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Novagold Resources and Dupont Denemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont Denemours 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 Dupont Denemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont Denemours has no effect on the direction of Novagold Resources i.e., Novagold Resources and Dupont Denemours go up and down completely randomly.

Pair Corralation between Novagold Resources and Dupont Denemours

Allowing for the 90-day total investment horizon Novagold Resources is expected to generate 1.44 times more return on investment than Dupont Denemours. However, Novagold Resources is 1.44 times more volatile than Dupont Denemours. It trades about 0.0 of its potential returns per unit of risk. Dupont Denemours is currently generating about -0.01 per unit of risk. If you would invest  638.00  in Novagold Resources on August 31, 2022 and sell it today you would lose (74.00)  from holding Novagold Resources or give up 11.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Novagold Resources  vs.  Dupont Denemours

 Performance (%) 
       Timeline  
Novagold Resources 
Novagold Performance
9 of 100
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 rather sluggish technical and fundamental indicators, Novagold Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Novagold Price Channel

Dupont Denemours 
Dupont Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dupont Denemours are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Dupont Denemours exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dupont Price Channel

Novagold Resources and Dupont Denemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novagold Resources and Dupont Denemours

The main advantage of trading using opposite Novagold Resources and Dupont Denemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novagold Resources position performs unexpectedly, Dupont Denemours 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 Dupont Denemours will offset losses from the drop in Dupont Denemours' long position.
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The idea behind Novagold Resources and Dupont Denemours 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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