Correlation Between Piedmont Lithium and Nouveau Monde
Can any of the company-specific risk be diversified away by investing in both Piedmont Lithium and Nouveau Monde 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 Piedmont Lithium and Nouveau Monde into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piedmont Lithium Ltd and Nouveau Monde Graphite, you can compare the effects of market volatilities on Piedmont Lithium and Nouveau Monde 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 Piedmont Lithium with a short position of Nouveau Monde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piedmont Lithium and Nouveau Monde.
Diversification Opportunities for Piedmont Lithium and Nouveau Monde
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Piedmont and Nouveau is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium Ltd and Nouveau Monde Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Monde Graphite and Piedmont 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 Piedmont Lithium Ltd are associated (or correlated) with Nouveau Monde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Monde Graphite has no effect on the direction of Piedmont Lithium i.e., Piedmont Lithium and Nouveau Monde go up and down completely randomly.
Pair Corralation between Piedmont Lithium and Nouveau Monde
Considering the 90-day investment horizon Piedmont Lithium Ltd is expected to generate 1.79 times more return on investment than Nouveau Monde. However, Piedmont Lithium is 1.79 times more volatile than Nouveau Monde Graphite. It trades about 0.02 of its potential returns per unit of risk. Nouveau Monde Graphite is currently generating about -0.05 per unit of risk. If you would invest 1,490 in Piedmont Lithium Ltd on August 29, 2024 and sell it today you would lose (261.00) from holding Piedmont Lithium Ltd or give up 17.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Piedmont Lithium Ltd vs. Nouveau Monde Graphite
Performance |
| Timeline |
| Piedmont Lithium |
| Nouveau Monde Graphite |
Piedmont Lithium and Nouveau Monde Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Piedmont Lithium and Nouveau Monde
The main advantage of trading using opposite Piedmont Lithium and Nouveau Monde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium position performs unexpectedly, Nouveau Monde 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 Nouveau Monde will offset losses from the drop in Nouveau Monde's long position.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
| Nouveau Monde vs. Mason Graphite | Nouveau Monde vs. Northern Graphite | Nouveau Monde vs. Graphite One | Nouveau Monde vs. Lomiko Metals |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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