Correlation Between Amazon and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Nova Lithium Corp, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Nova Lithium.
Diversification Opportunities for Amazon and Nova Lithium
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Nova is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Nova Lithium go up and down completely randomly.
Pair Corralation between Amazon and Nova Lithium
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.42 times more return on investment than Nova Lithium. However, Amazon Inc is 2.4 times less risky than Nova Lithium. It trades about 0.24 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about -0.07 per unit of risk. If you would invest 18,640 in Amazon Inc on September 1, 2024 and sell it today you would earn a total of 2,149 from holding Amazon Inc or generate 11.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon Inc vs. Nova Lithium Corp
Performance |
| Timeline |
| Amazon Inc |
| Nova Lithium Corp |
Amazon and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Nova Lithium
The main advantage of trading using opposite Amazon and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.The idea behind Amazon Inc and Nova Lithium Corp 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.| Nova Lithium vs. Legacy Education | Nova Lithium vs. Apple Inc | Nova Lithium vs. NVIDIA | Nova Lithium vs. Microsoft |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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