Correlation Between American Battery and Nova Minerals

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

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

Diversification Opportunities for American Battery and Nova Minerals

-0.25

Correlation Coefficient

American Battery  Nova Minerals

Very good diversification

The 3 months correlation between American and Nova is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding American Battery Metals and Nova Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Minerals Limited and American Battery 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 American Battery Metals are associated (or correlated) with Nova Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Minerals Limited has no effect on the direction of American Battery i.e., American Battery and Nova Minerals go up and down completely randomly.

Pair Corralation between American Battery and Nova Minerals

Given the investment horizon of 90 days American Battery is expected to generate 15.5 times less return on investment than Nova Minerals. But when comparing it to its historical volatility, American Battery Metals is 9.66 times less risky than Nova Minerals. It trades about 0.06 of its potential returns per unit of risk. Nova Minerals Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Nova Minerals Limited on September 4, 2024 and sell it today you would lose (33.00) from holding Nova Minerals Limited or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.71%
Values	Daily Returns

American Battery Metals  vs.  Nova Minerals Limited

American Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, American Battery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nova Minerals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Battery and Nova Minerals

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

The idea behind American Battery Metals and Nova Minerals Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.