Correlation Between NVIDIA and Nova Lithium

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

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

Diversification Opportunities for NVIDIA and Nova Lithium

0.7

Correlation Coefficient

NVIDIA  Nova Lithium

Poor diversification

The 3 months correlation between NVIDIA and Nova is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Nova Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lithium Corp and NVIDIA 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 NVIDIA are associated (or correlated) with Nova Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lithium Corp has no effect on the direction of NVIDIA i.e., NVIDIA and Nova Lithium go up and down completely randomly.

Pair Corralation between NVIDIA and Nova Lithium

Given the investment horizon of 90 days NVIDIA is expected to generate 0.42 times more return on investment than Nova Lithium. However, NVIDIA is 2.37 times less risky than Nova Lithium. It trades about -0.05 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about -0.06 per unit of risk. If you would invest  13,748  in NVIDIA on December 28, 2024 and sell it today you would lose (2,372) from holding NVIDIA or give up 17.25% of portfolio value over 90 days.

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

NVIDIA  vs.  Nova Lithium Corp

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA 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 fundamental 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.

Nova Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and Nova Lithium

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

The idea behind NVIDIA and Nova Lithium 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.