Correlation Between Nova Lithium and Québec Nickel
Can any of the company-specific risk be diversified away by investing in both Nova Lithium and Québec Nickel 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 Nova Lithium and Québec Nickel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nova Lithium Corp and Qubec Nickel Corp, you can compare the effects of market volatilities on Nova Lithium and Québec Nickel 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 Nova Lithium with a short position of Québec Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Lithium and Québec Nickel.
Diversification Opportunities for Nova Lithium and Québec Nickel
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nova and Québec is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nova Lithium Corp and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel Corp and Nova Lithium 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 Nova Lithium Corp are associated (or correlated) with Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of Nova Lithium i.e., Nova Lithium and Québec Nickel go up and down completely randomly.
Pair Corralation between Nova Lithium and Québec Nickel
Assuming the 90 days horizon Nova Lithium Corp is expected to generate 2.13 times more return on investment than Québec Nickel. However, Nova Lithium is 2.13 times more volatile than Qubec Nickel Corp. It trades about 0.08 of its potential returns per unit of risk. Qubec Nickel Corp is currently generating about 0.01 per unit of risk. 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nova Lithium Corp vs. Qubec Nickel Corp
Performance |
| Timeline |
| Nova Lithium Corp |
| Qubec Nickel Corp |
Nova Lithium and Québec Nickel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nova Lithium and Québec Nickel
The main advantage of trading using opposite Nova Lithium and Québec Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nova Lithium position performs unexpectedly, Québec Nickel 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 Québec Nickel will offset losses from the drop in Québec Nickel's long position.| Nova Lithium vs. Legacy Education | Nova Lithium vs. Apple Inc | Nova Lithium vs. NVIDIA | Nova Lithium vs. Microsoft |
| Québec Nickel vs. Norra Metals Corp | Québec Nickel vs. E79 Resources Corp | Québec Nickel vs. Voltage Metals Corp | Québec Nickel vs. Cantex Mine Development |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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