Correlation Between Graphite One and Nouveau Monde

Can any of the company-specific risk be diversified away by investing in both Graphite One and Nouveau Monde 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 Graphite One and Nouveau Monde into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Graphite One and Nouveau Monde

0.51

Correlation Coefficient

Graphite One  Nouveau Monde

Very weak diversification

The 3 months correlation between Graphite and Nouveau is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Graphite One and Nouveau Monde Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Monde Graphite and Graphite One 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 Graphite One are associated (or correlated) with Nouveau Monde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Monde Graphite has no effect on the direction of Graphite One i.e., Graphite One and Nouveau Monde go up and down completely randomly.

Pair Corralation between Graphite One and Nouveau Monde

Assuming the 90 days horizon Graphite One is expected to generate 1.04 times more return on investment than Nouveau Monde. However, Graphite One is 1.04 times more volatile than Nouveau Monde Graphite. It trades about 0.02 of its potential returns per unit of risk. Nouveau Monde Graphite is currently generating about -0.12 per unit of risk. If you would invest  56.00  in Graphite One on August 30, 2024 and sell it today you would earn a total of  1.00  from holding Graphite One or generate 1.79% return on investment over 90 days.

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

Graphite One  vs.  Nouveau Monde Graphite

Graphite One

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphite One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nouveau Monde Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nouveau Monde Graphite 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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Graphite One and Nouveau Monde

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

The idea behind Graphite One and Nouveau Monde Graphite 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.