Correlation Between Nova Lithium and Mundoro Capital

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

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

Diversification Opportunities for Nova Lithium and Mundoro Capital

0.52

Correlation Coefficient

Nova Lithium  Mundoro Capital

Very weak diversification

The 3 months correlation between Nova and Mundoro is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nova Lithium Corp and Mundoro Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundoro Capital and Nova Lithium 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 Lithium Corp are associated (or correlated) with Mundoro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundoro Capital has no effect on the direction of Nova Lithium i.e., Nova Lithium and Mundoro Capital go up and down completely randomly.

Pair Corralation between Nova Lithium and Mundoro Capital

Assuming the 90 days horizon Nova Lithium Corp is expected to under-perform the Mundoro Capital. In addition to that, Nova Lithium is 2.18 times more volatile than Mundoro Capital. It trades about -0.02 of its total potential returns per unit of risk. Mundoro Capital is currently generating about -0.02 per unit of volatility. If you would invest  14.00  in Mundoro Capital on September 2, 2024 and sell it today you would lose (1.00) from holding Mundoro Capital or give up 7.14% of portfolio value over 90 days.

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

Nova Lithium Corp  vs.  Mundoro Capital

Nova Lithium Corp

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mundoro Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mundoro Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Mundoro Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nova Lithium and Mundoro Capital

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

The idea behind Nova Lithium Corp and Mundoro Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.