Correlation Between Nouveau Monde and Brazil Potash

Can any of the company-specific risk be diversified away by investing in both Nouveau Monde and Brazil Potash 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 Nouveau Monde and Brazil Potash into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nouveau Monde Graphite and Brazil Potash Corp, you can compare the effects of market volatilities on Nouveau Monde and Brazil Potash 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 Nouveau Monde with a short position of Brazil Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nouveau Monde and Brazil Potash.

Diversification Opportunities for Nouveau Monde and Brazil Potash

-0.39

Correlation Coefficient

Nouveau Monde  Brazil Potash

Very good diversification

The 3 months correlation between Nouveau and Brazil is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nouveau Monde Graphite and Brazil Potash Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brazil Potash Corp and Nouveau Monde 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 Nouveau Monde Graphite are associated (or correlated) with Brazil Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brazil Potash Corp has no effect on the direction of Nouveau Monde i.e., Nouveau Monde and Brazil Potash go up and down completely randomly.

Pair Corralation between Nouveau Monde and Brazil Potash

Considering the 90-day investment horizon Nouveau Monde Graphite is expected to generate 1.48 times more return on investment than Brazil Potash. However, Nouveau Monde is 1.48 times more volatile than Brazil Potash Corp. It trades about 0.33 of its potential returns per unit of risk. Brazil Potash Corp is currently generating about -0.45 per unit of risk. If you would invest  137.00  in Nouveau Monde Graphite on October 9, 2024 and sell it today you would earn a total of  73.00  from holding Nouveau Monde Graphite or generate 53.28% return on investment over 90 days.

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

Nouveau Monde Graphite  vs.  Brazil Potash Corp

Nouveau Monde Graphite

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nouveau Monde Graphite are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Nouveau Monde reported solid returns over the last few months and may actually be approaching a breakup point.

Brazil Potash Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brazil Potash Corp 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nouveau Monde and Brazil Potash

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

The idea behind Nouveau Monde Graphite and Brazil Potash 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.