Correlation Between Hannan Metals and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both Hannan Metals 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 Hannan Metals and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hannan Metals and Nova Lithium Corp, you can compare the effects of market volatilities on Hannan Metals 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 Hannan Metals with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannan Metals and Nova Lithium.
Diversification Opportunities for Hannan Metals and Nova Lithium
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hannan and Nova is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hannan Metals 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 Hannan Metals 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 Hannan Metals 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 Hannan Metals i.e., Hannan Metals and Nova Lithium go up and down completely randomly.
Pair Corralation between Hannan Metals and Nova Lithium
Assuming the 90 days horizon Hannan Metals is expected to generate 7.37 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, Hannan Metals is 5.22 times less risky than Nova Lithium. It trades about 0.06 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 27.00 in Nova Lithium Corp on September 1, 2024 and sell it today you would lose (2.00) from holding Nova Lithium Corp or give up 7.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.78% |
| Values | Daily Returns |
Hannan Metals vs. Nova Lithium Corp
Performance |
| Timeline |
| Hannan Metals |
| Nova Lithium Corp |
Hannan Metals and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hannan Metals and Nova Lithium
The main advantage of trading using opposite Hannan Metals and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannan Metals 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.| Hannan Metals vs. Atco Mining | Hannan Metals vs. Leading Edge Materials | Hannan Metals vs. Arianne Phosphate | Hannan Metals vs. Global Battery Metals |
| 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 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.
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