Correlation Between Nouveau Monde and Avalon Advanced
Can any of the company-specific risk be diversified away by investing in both Nouveau Monde and Avalon Advanced 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 Nouveau Monde and Avalon Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nouveau Monde Graphite and Avalon Advanced Materials, you can compare the effects of market volatilities on Nouveau Monde and Avalon Advanced 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 Nouveau Monde with a short position of Avalon Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nouveau Monde and Avalon Advanced.
Diversification Opportunities for Nouveau Monde and Avalon Advanced
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nouveau and Avalon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nouveau Monde Graphite and Avalon Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Advanced Materials and Nouveau Monde 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 Nouveau Monde Graphite are associated (or correlated) with Avalon Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Advanced Materials has no effect on the direction of Nouveau Monde i.e., Nouveau Monde and Avalon Advanced go up and down completely randomly.
Pair Corralation between Nouveau Monde and Avalon Advanced
Considering the 90-day investment horizon Nouveau Monde Graphite is expected to under-perform the Avalon Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Nouveau Monde Graphite is 1.35 times less risky than Avalon Advanced. The stock trades about -0.05 of its potential returns per unit of risk. The Avalon Advanced Materials is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 8.48 in Avalon Advanced Materials on September 2, 2024 and sell it today you would earn a total of 2.52 from holding Avalon Advanced Materials or generate 29.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 8.27% |
| Values | Daily Returns |
Nouveau Monde Graphite vs. Avalon Advanced Materials
Performance |
| Timeline |
| Nouveau Monde Graphite |
| Avalon Advanced Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Nouveau Monde and Avalon Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nouveau Monde and Avalon Advanced
The main advantage of trading using opposite Nouveau Monde and Avalon Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nouveau Monde position performs unexpectedly, Avalon Advanced 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 Avalon Advanced will offset losses from the drop in Avalon Advanced's long position.| Nouveau Monde vs. Teck Resources Ltd | Nouveau Monde vs. Sigma Lithium Resources | Nouveau Monde vs. Vale SA ADR | Nouveau Monde vs. Sayona Mining Limited |
| Avalon Advanced vs. Aurelia Metals Limited | Avalon Advanced vs. Artemis Resources | Avalon Advanced vs. Ascendant Resources | Avalon Advanced vs. Benton Resources |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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