Correlation Between Nuinsco Resources and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Nuinsco Resources and Lithium Australia 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 Nuinsco Resources and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nuinsco Resources Limited and Lithium Australia NL, you can compare the effects of market volatilities on Nuinsco Resources and Lithium Australia 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 Nuinsco Resources with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuinsco Resources and Lithium Australia.
Diversification Opportunities for Nuinsco Resources and Lithium Australia
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nuinsco and Lithium is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nuinsco Resources Limited and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Nuinsco Resources 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 Nuinsco Resources Limited are associated (or correlated) with Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Nuinsco Resources i.e., Nuinsco Resources and Lithium Australia go up and down completely randomly.
Pair Corralation between Nuinsco Resources and Lithium Australia
Assuming the 90 days horizon Nuinsco Resources is expected to generate 3.88 times less return on investment than Lithium Australia. But when comparing it to its historical volatility, Nuinsco Resources Limited is 3.44 times less risky than Lithium Australia. It trades about 0.06 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.97 in Lithium Australia NL on August 29, 2024 and sell it today you would lose (0.47) from holding Lithium Australia NL or give up 23.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nuinsco Resources Limited vs. Lithium Australia NL
Performance |
| Timeline |
| Nuinsco Resources |
| Lithium Australia |
Nuinsco Resources and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nuinsco Resources and Lithium Australia
The main advantage of trading using opposite Nuinsco Resources and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuinsco Resources position performs unexpectedly, Lithium Australia 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 Lithium Australia will offset losses from the drop in Lithium Australia's long position.| Nuinsco Resources vs. Silver Hammer Mining | Nuinsco Resources vs. Reyna Silver Corp | Nuinsco Resources vs. Guanajuato Silver | Nuinsco Resources vs. Silver One Resources |
| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO Limited |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |