Correlation Between Bradda Head and Nova Lithium

Can any of the company-specific risk be diversified away by investing in both Bradda Head 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 Bradda Head and Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bradda Head Lithium and Nova Lithium Corp, you can compare the effects of market volatilities on Bradda Head 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 Bradda Head with a short position of Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bradda Head and Nova Lithium.

Diversification Opportunities for Bradda Head and Nova Lithium

0.0

Correlation Coefficient

Bradda Head  Nova Lithium

Pay attention - limited upside

The 3 months correlation between Bradda and Nova is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bradda Head Lithium 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 Bradda Head 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 Bradda Head Lithium 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 Bradda Head i.e., Bradda Head and Nova Lithium go up and down completely randomly.

Pair Corralation between Bradda Head and Nova Lithium

Assuming the 90 days horizon Bradda Head Lithium is expected to generate 0.16 times more return on investment than Nova Lithium. However, Bradda Head Lithium is 6.24 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 -0.02 per unit of risk. If you would invest  1.70  in Bradda Head Lithium on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Bradda Head Lithium or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bradda Head Lithium  vs.  Nova Lithium Corp

Bradda Head Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bradda Head Lithium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Bradda Head is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nova Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bradda Head and Nova Lithium

The main advantage of trading using opposite Bradda Head and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bradda Head 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.

The idea behind Bradda Head Lithium and Nova Lithium Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.