Correlation Between Argosy Minerals and Nova Lithium

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

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

Diversification Opportunities for Argosy Minerals and Nova Lithium

0.36

Correlation Coefficient

Argosy Minerals  Nova Lithium

Weak diversification

The 3 months correlation between Argosy and Nova is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Argosy Minerals Limited 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 Argosy Minerals 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 Argosy Minerals Limited 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 Argosy Minerals i.e., Argosy Minerals and Nova Lithium go up and down completely randomly.

Pair Corralation between Argosy Minerals and Nova Lithium

Assuming the 90 days horizon Argosy Minerals Limited is expected to under-perform the Nova Lithium. In addition to that, Argosy Minerals is 1.18 times more volatile than Nova Lithium Corp. It trades about -0.03 of its total potential returns per unit of risk. Nova Lithium Corp is currently generating about 0.0 per unit of volatility. If you would invest  29.00  in Nova Lithium Corp on September 4, 2024 and sell it today you would lose (4.00) from holding Nova Lithium Corp or give up 13.79% of portfolio value over 90 days.

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

Argosy Minerals Limited  vs.  Nova Lithium Corp

Argosy Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argosy Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 nearly stable forward indicators, Nova Lithium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Argosy Minerals and Nova Lithium

The main advantage of trading using opposite Argosy Minerals and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argosy Minerals 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 Argosy Minerals Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.