Correlation Between Nexa Resources and Lithium Americas

Can any of the company-specific risk be diversified away by investing in both Nexa Resources and Lithium Americas 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 Lithium Americas 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 Lithium Americas Corp, you can compare the effects of market volatilities on Nexa Resources and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexa Resources and Lithium Americas.

Diversification Opportunities for Nexa Resources and Lithium Americas

0.35

Correlation Coefficient

Nexa Resources  Lithium Americas

Weak diversification

The 3 months correlation between Nexa and Lithium is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources SA and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Nexa Resources i.e., Nexa Resources and Lithium Americas go up and down completely randomly.

Pair Corralation between Nexa Resources and Lithium Americas

Given the investment horizon of 90 days Nexa Resources SA is expected to under-perform the Lithium Americas. In addition to that, Nexa Resources is 1.3 times more volatile than Lithium Americas Corp. It trades about -0.12 of its total potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.01 per unit of volatility. If you would invest  300.00  in Lithium Americas Corp on December 28, 2024 and sell it today you would lose (15.00) from holding Lithium Americas Corp or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nexa Resources SA  vs.  Lithium Americas Corp

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lithium Americas Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lithium Americas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nexa Resources and Lithium Americas

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

The idea behind Nexa Resources SA and Lithium Americas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.