Correlation Between Nouveau Monde and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Nouveau Monde and Sigma 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 Nouveau Monde and Sigma Lithium 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 Sigma Lithium Resources, you can compare the effects of market volatilities on Nouveau Monde and Sigma 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 Nouveau Monde with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nouveau Monde and Sigma Lithium.
Diversification Opportunities for Nouveau Monde and Sigma Lithium
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nouveau and Sigma is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nouveau Monde Graphite and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources 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 Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Nouveau Monde i.e., Nouveau Monde and Sigma Lithium go up and down completely randomly.
Pair Corralation between Nouveau Monde and Sigma Lithium
Considering the 90-day investment horizon Nouveau Monde Graphite is expected to generate 1.85 times more return on investment than Sigma Lithium. However, Nouveau Monde is 1.85 times more volatile than Sigma Lithium Resources. It trades about 0.35 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.13 per unit of risk. If you would invest 154.00 in Nouveau Monde Graphite on October 22, 2024 and sell it today you would earn a total of 72.00 from holding Nouveau Monde Graphite or generate 46.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nouveau Monde Graphite vs. Sigma Lithium Resources
Performance |
| Timeline |
| Nouveau Monde Graphite |
| Sigma Lithium Resources |
Nouveau Monde and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nouveau Monde and Sigma Lithium
The main advantage of trading using opposite Nouveau Monde and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nouveau Monde position performs unexpectedly, Sigma 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.| Nouveau Monde vs. Mason Graphite | Nouveau Monde vs. Northern Graphite | Nouveau Monde vs. Graphite One | Nouveau Monde vs. Lomiko Metals |
| Sigma Lithium vs. Piedmont Lithium Ltd | Sigma Lithium vs. Standard Lithium | Sigma Lithium vs. MP Materials Corp | Sigma Lithium vs. Vale SA ADR |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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