Correlation Between EMCOR and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both EMCOR 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 EMCOR and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Nova Lithium Corp, you can compare the effects of market volatilities on EMCOR 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 EMCOR with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Nova Lithium.
Diversification Opportunities for EMCOR and Nova Lithium
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between EMCOR and Nova is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group 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 EMCOR 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 EMCOR Group 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 EMCOR i.e., EMCOR and Nova Lithium go up and down completely randomly.
Pair Corralation between EMCOR and Nova Lithium
Considering the 90-day investment horizon EMCOR is expected to generate 1.91 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, EMCOR Group is 2.64 times less risky than Nova Lithium. It trades about 0.27 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Nova Lithium Corp on October 22, 2024 and sell it today you would earn a total of 4.00 from holding Nova Lithium Corp or generate 16.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
EMCOR Group vs. Nova Lithium Corp
Performance |
| Timeline |
| EMCOR Group |
| Nova Lithium Corp |
EMCOR and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Nova Lithium
The main advantage of trading using opposite EMCOR and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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 EMCOR Group 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. Western Digital | Nova Lithium vs. EMCOR Group | Nova Lithium vs. Sinclair Broadcast Group | Nova Lithium vs. Rocky Brands |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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