Correlation Between NYSE Composite and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Nova 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 NYSE Composite and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Nova Lithium Corp, you can compare the effects of market volatilities on NYSE Composite and Nova 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 NYSE Composite with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Nova Lithium.
Diversification Opportunities for NYSE Composite and Nova Lithium
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NYSE and Nova is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Nova Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lithium Corp and NYSE Composite 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 NYSE Composite are associated (or correlated) with Nova Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lithium Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Nova Lithium go up and down completely randomly.
Pair Corralation between NYSE Composite and Nova Lithium
Assuming the 90 days trading horizon NYSE Composite is expected to generate 40.81 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, NYSE Composite is 41.35 times less risky than Nova Lithium. It trades about 0.08 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Nova Lithium Corp on September 3, 2024 and sell it today you would lose (3.00) from holding Nova Lithium Corp or give up 10.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Nova Lithium Corp
Performance |
| Timeline |
NYSE Composite and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Nova Lithium Corp
Pair trading matchups for Nova Lithium
Pair Trading with NYSE Composite and Nova Lithium
The main advantage of trading using opposite NYSE Composite and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Nova 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 Nova Lithium will offset losses from the drop in Nova Lithium's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Nova Lithium vs. Apple Inc | Nova Lithium vs. Microsoft | Nova Lithium vs. Amazon Inc | Nova Lithium vs. Alphabet Inc Class C |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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