Correlation Between Weibo Corp and Nova Lithium

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

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

Diversification Opportunities for Weibo Corp and Nova Lithium

-0.46

Correlation Coefficient

Weibo Corp  Nova Lithium

Very good diversification

The 3 months correlation between Weibo and Nova is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp 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 Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Nova Lithium go up and down completely randomly.

Pair Corralation between Weibo Corp and Nova Lithium

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 12.15 times less return on investment than Nova Lithium. But when comparing it to its historical volatility, Weibo Corp is 6.3 times less risky than Nova Lithium. It trades about 0.04 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.91  in Nova Lithium Corp on October 9, 2024 and sell it today you would earn a total of  15.09  from holding Nova Lithium Corp or generate 190.77% return on investment over 90 days.

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

Weibo Corp  vs.  Nova Lithium Corp

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 fragile 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.

Pair Trading with Weibo Corp and Nova Lithium

The main advantage of trading using opposite Weibo Corp and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.