Correlation Between Western Digital and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both Western Digital 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 Western Digital and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Nova Lithium Corp, you can compare the effects of market volatilities on Western Digital 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 Western Digital with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Nova Lithium.
Diversification Opportunities for Western Digital and Nova Lithium
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Nova is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 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 Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Nova Lithium go up and down completely randomly.
Pair Corralation between Western Digital and Nova Lithium
Considering the 90-day investment horizon Western Digital is expected to generate 2.59 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, Western Digital is 3.91 times less risky than Nova Lithium. It trades about 0.13 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Nova Lithium Corp on November 3, 2024 and sell it today you would earn a total of 2.00 from holding Nova Lithium Corp or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Digital vs. Nova Lithium Corp
Performance |
| Timeline |
| Western Digital |
| Nova Lithium Corp |
Western Digital and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Nova Lithium
The main advantage of trading using opposite Western Digital and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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.| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
| Nova Lithium vs. Sotherly Hotels Series | Nova Lithium vs. BJs Restaurants | Nova Lithium vs. 51Talk Online Education | Nova Lithium vs. One Group Hospitality |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |