Correlation Between Primoris Services and Nova Lithium

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

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

Diversification Opportunities for Primoris Services and Nova Lithium

0.8

Correlation Coefficient

Primoris Services  Nova Lithium

Very poor diversification

The 3 months correlation between Primoris and Nova is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services 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 Primoris Services 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 Primoris Services 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 Primoris Services i.e., Primoris Services and Nova Lithium go up and down completely randomly.

Pair Corralation between Primoris Services and Nova Lithium

Given the investment horizon of 90 days Primoris Services is expected to generate 0.39 times more return on investment than Nova Lithium. However, Primoris Services is 2.55 times less risky than Nova Lithium. It trades about -0.07 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about -0.05 per unit of risk. If you would invest  8,057  in Primoris Services on December 20, 2024 and sell it today you would lose (1,587) from holding Primoris Services or give up 19.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Primoris Services  vs.  Nova Lithium Corp

Primoris Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primoris Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 abnormal 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 Primoris Services and Nova Lithium

The main advantage of trading using opposite Primoris Services and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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 Primoris Services 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.