Correlation Between American Lithium and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both American Lithium and Nova Lithium 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 American Lithium and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Lithium Minerals and Nova Lithium Corp, you can compare the effects of market volatilities on American Lithium and Nova Lithium 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 American Lithium with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Nova Lithium.
Diversification Opportunities for American Lithium and Nova Lithium
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Nova is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Minerals and Nova Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lithium Corp and American Lithium 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 American Lithium Minerals are associated (or correlated) with Nova Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lithium Corp has no effect on the direction of American Lithium i.e., American Lithium and Nova Lithium go up and down completely randomly.
Pair Corralation between American Lithium and Nova Lithium
Given the investment horizon of 90 days American Lithium is expected to generate 6.91 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, American Lithium Minerals is 2.84 times less risky than Nova Lithium. It trades about 0.03 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Nova Lithium Corp on November 5, 2024 and sell it today you would lose (2.00) from holding Nova Lithium Corp or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Lithium Minerals vs. Nova Lithium Corp
Performance |
| Timeline |
| American Lithium Minerals |
| Nova Lithium Corp |
American Lithium and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Nova Lithium
The main advantage of trading using opposite American Lithium and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Nova Lithium 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 Nova Lithium will offset losses from the drop in Nova Lithium's long position.| American Lithium vs. Artemis Resources | American Lithium vs. St Georges Eco Mining Corp | American Lithium vs. Atco Mining | American Lithium vs. Avarone Metals |
| Nova Lithium vs. Saia Inc | Nova Lithium vs. PennantPark Floating Rate | Nova Lithium vs. Verra Mobility Corp | Nova Lithium vs. Toro |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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