Correlation Between Québec Nickel and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both Québec Nickel 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 Québec Nickel and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qubec Nickel Corp and Nova Lithium Corp, you can compare the effects of market volatilities on Québec Nickel 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 Québec Nickel with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Québec Nickel and Nova Lithium.
Diversification Opportunities for Québec Nickel and Nova Lithium
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Québec and Nova is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Qubec Nickel Corp 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 Québec Nickel 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 Qubec Nickel Corp 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 Québec Nickel i.e., Québec Nickel and Nova Lithium go up and down completely randomly.
Pair Corralation between Québec Nickel and Nova Lithium
Assuming the 90 days horizon Québec Nickel is expected to generate 24.73 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, Qubec Nickel Corp is 2.13 times less risky than Nova Lithium. It trades about 0.01 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 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 |
Qubec Nickel Corp vs. Nova Lithium Corp
Performance |
| Timeline |
| Qubec Nickel Corp |
| Nova Lithium Corp |
Québec Nickel and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Québec Nickel and Nova Lithium
The main advantage of trading using opposite Québec Nickel and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Québec Nickel 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.| Québec Nickel vs. Norra Metals Corp | Québec Nickel vs. E79 Resources Corp | Québec Nickel vs. Voltage Metals Corp | Québec Nickel vs. Cantex Mine Development |
| Nova Lithium vs. Legacy Education | Nova Lithium vs. Apple Inc | Nova Lithium vs. NVIDIA | Nova Lithium vs. Microsoft |
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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