Correlation Between Nova Minerals and Monitor Ventures

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

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

Diversification Opportunities for Nova Minerals and Monitor Ventures

0.3

Correlation Coefficient

Nova Minerals  Monitor Ventures

Weak diversification

The 3 months correlation between Nova and Monitor is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nova Minerals Limited and Monitor Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monitor Ventures and Nova 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 Nova Minerals Limited are associated (or correlated) with Monitor Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monitor Ventures has no effect on the direction of Nova Minerals i.e., Nova Minerals and Monitor Ventures go up and down completely randomly.

Pair Corralation between Nova Minerals and Monitor Ventures

Assuming the 90 days horizon Nova Minerals is expected to generate 1.7 times less return on investment than Monitor Ventures. In addition to that, Nova Minerals is 4.81 times more volatile than Monitor Ventures. It trades about 0.01 of its total potential returns per unit of risk. Monitor Ventures is currently generating about 0.06 per unit of volatility. If you would invest  7.00  in Monitor Ventures on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Monitor Ventures or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Nova Minerals Limited  vs.  Monitor Ventures

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.

Monitor Ventures

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monitor Ventures are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Monitor Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Minerals and Monitor Ventures

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

The idea behind Nova Minerals Limited and Monitor Ventures 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.