Correlation Between Lithium Americas and Nouveau Monde
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Nouveau Monde 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 Lithium Americas and Nouveau Monde into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Americas Corp and Nouveau Monde Graphite, you can compare the effects of market volatilities on Lithium Americas and Nouveau Monde 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 Lithium Americas with a short position of Nouveau Monde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Nouveau Monde.
Diversification Opportunities for Lithium Americas and Nouveau Monde
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithium and Nouveau is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Nouveau Monde Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Monde Graphite and Lithium Americas 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 Lithium Americas Corp are associated (or correlated) with Nouveau Monde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Monde Graphite has no effect on the direction of Lithium Americas i.e., Lithium Americas and Nouveau Monde go up and down completely randomly.
Pair Corralation between Lithium Americas and Nouveau Monde
Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the Nouveau Monde. In addition to that, Lithium Americas is 1.31 times more volatile than Nouveau Monde Graphite. It trades about -0.05 of its total potential returns per unit of risk. Nouveau Monde Graphite is currently generating about -0.05 per unit of volatility. If you would invest 487.00 in Nouveau Monde Graphite on August 23, 2024 and sell it today you would lose (362.00) from holding Nouveau Monde Graphite or give up 74.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.32% |
| Values | Daily Returns |
Lithium Americas Corp vs. Nouveau Monde Graphite
Performance |
| Timeline |
| Lithium Americas Corp |
| Nouveau Monde Graphite |
Lithium Americas and Nouveau Monde Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and Nouveau Monde
The main advantage of trading using opposite Lithium Americas and Nouveau Monde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Nouveau Monde 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 Nouveau Monde will offset losses from the drop in Nouveau Monde's long position.| Lithium Americas vs. Qubec Nickel Corp | Lithium Americas vs. Cypress Development Corp | Lithium Americas vs. Lake Resources NL | Lithium Americas vs. Sayona Mining Limited |
| Nouveau Monde vs. Mason Graphite | Nouveau Monde vs. Northern Graphite | Nouveau Monde vs. Graphite One | Nouveau Monde vs. Lomiko Metals |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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