Correlation Between Nexa Resources and Foremost Lithium

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

By analyzing existing cross correlation between Nexa Resources SA and Foremost Lithium Resource, you can compare the effects of market volatilities on Nexa Resources and Foremost 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 Nexa Resources with a short position of Foremost Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexa Resources and Foremost Lithium.

Diversification Opportunities for Nexa Resources and Foremost Lithium

0.43

Correlation Coefficient

Nexa Resources  Foremost Lithium

Very weak diversification

The 3 months correlation between Nexa and Foremost is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources SA and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource and Nexa Resources 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 Nexa Resources SA are associated (or correlated) with Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Nexa Resources i.e., Nexa Resources and Foremost Lithium go up and down completely randomly.

Pair Corralation between Nexa Resources and Foremost Lithium

Given the investment horizon of 90 days Nexa Resources SA is expected to generate 0.32 times more return on investment than Foremost Lithium. However, Nexa Resources SA is 3.17 times less risky than Foremost Lithium. It trades about -0.08 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about -0.04 per unit of risk. If you would invest  762.00  in Nexa Resources SA on November 28, 2024 and sell it today you would lose (198.00) from holding Nexa Resources SA or give up 25.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.37%
Values	Daily Returns

Nexa Resources SA  vs.  Foremost Lithium Resource

Nexa Resources SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexa Resources SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Foremost Lithium Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nexa Resources and Foremost Lithium

The main advantage of trading using opposite Nexa Resources and Foremost Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexa Resources position performs unexpectedly, Foremost 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 Foremost Lithium will offset losses from the drop in Foremost Lithium's long position.

The idea behind Nexa Resources SA and Foremost Lithium Resource 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.