Correlation Between Nouveau Monde and Materion

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

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

Diversification Opportunities for Nouveau Monde and Materion

-0.51

Correlation Coefficient

Nouveau Monde  Materion

Excellent diversification

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

Pair Corralation between Nouveau Monde and Materion

Considering the 90-day investment horizon Nouveau Monde Graphite is expected to under-perform the Materion. But the stock apears to be less risky and, when comparing its historical volatility, Nouveau Monde Graphite is 1.02 times less risky than Materion. The stock trades about -0.1 of its potential returns per unit of risk. The Materion is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,619  in Materion on September 3, 2024 and sell it today you would earn a total of  1,177  from holding Materion or generate 11.08% return on investment over 90 days.

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

Nouveau Monde Graphite  vs.  Materion

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Materion

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Materion are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Materion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nouveau Monde and Materion

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

The idea behind Nouveau Monde Graphite and Materion 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.