Correlation Between Nova Lithium and Québec Nickel

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

Diversification Opportunities for Nova Lithium and Québec Nickel

0.2

Correlation Coefficient

Nova Lithium  Québec Nickel

Modest diversification

The 3 months correlation between Nova and Québec is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nova Lithium Corp and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel Corp 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 Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of Nova Lithium i.e., Nova Lithium and Québec Nickel go up and down completely randomly.

Pair Corralation between Nova Lithium and Québec Nickel

Assuming the 90 days horizon Nova Lithium Corp is expected to under-perform the Québec Nickel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nova Lithium Corp is 1.86 times less risky than Québec Nickel. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Qubec Nickel Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Qubec Nickel Corp on September 2, 2024 and sell it today you would lose (6.25) from holding Qubec Nickel Corp or give up 78.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Nova Lithium Corp  vs.  Qubec Nickel Corp

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.

Qubec Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nova Lithium and Québec Nickel

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

The idea behind Nova Lithium Corp and Qubec Nickel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.