Correlation Between Nova Minerals and Collective Mining

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

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

Diversification Opportunities for Nova Minerals and Collective Mining

0.64

Correlation Coefficient

Nova Minerals  Collective Mining

Poor diversification

The 3 months correlation between Nova and Collective is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nova Minerals Limited and Collective Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collective Mining and Nova Minerals 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 Nova Minerals Limited are associated (or correlated) with Collective Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collective Mining has no effect on the direction of Nova Minerals i.e., Nova Minerals and Collective Mining go up and down completely randomly.

Pair Corralation between Nova Minerals and Collective Mining

Assuming the 90 days horizon Nova Minerals Limited is expected to generate 4.24 times more return on investment than Collective Mining. However, Nova Minerals is 4.24 times more volatile than Collective Mining. It trades about 0.12 of its potential returns per unit of risk. Collective Mining is currently generating about 0.07 per unit of risk. If you would invest  144.00  in Nova Minerals Limited on September 4, 2024 and sell it today you would earn a total of  81.00  from holding Nova Minerals Limited or generate 56.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

Nova Minerals Limited  vs.  Collective Mining

Nova Minerals Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Minerals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nova Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Collective Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Collective Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Minerals and Collective Mining

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

The idea behind Nova Minerals Limited and Collective Mining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.