Correlation Between Nexa Resources and Standard Lithium

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

Diversification Opportunities for Nexa Resources and Standard Lithium

0.43

Correlation Coefficient

Nexa Resources  Standard Lithium

Very weak diversification

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

Pair Corralation between Nexa Resources and Standard Lithium

Given the investment horizon of 90 days Nexa Resources SA is expected to under-perform the Standard Lithium. In addition to that, Nexa Resources is 1.14 times more volatile than Standard Lithium. It trades about -0.12 of its total potential returns per unit of risk. Standard Lithium is currently generating about -0.01 per unit of volatility. If you would invest  145.00  in Standard Lithium on December 28, 2024 and sell it today you would lose (9.00) from holding Standard Lithium or give up 6.21% of portfolio value over 90 days.

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

Nexa Resources SA  vs.  Standard Lithium

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.

Standard Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Standard Lithium is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nexa Resources and Standard Lithium

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

The idea behind Nexa Resources SA and Standard Lithium 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.