Correlation Between Advanced Braking and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Advanced Braking and Lithium Australia 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 Advanced Braking and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Braking Technology and Lithium Australia NL, you can compare the effects of market volatilities on Advanced Braking and Lithium Australia 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 Advanced Braking with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Lithium Australia.
Diversification Opportunities for Advanced Braking and Lithium Australia
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and Lithium is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Advanced Braking i.e., Advanced Braking and Lithium Australia go up and down completely randomly.
Pair Corralation between Advanced Braking and Lithium Australia
Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 0.91 times more return on investment than Lithium Australia. However, Advanced Braking Technology is 1.1 times less risky than Lithium Australia. It trades about -0.04 of its potential returns per unit of risk. Lithium Australia NL is currently generating about -0.26 per unit of risk. If you would invest 8.50 in Advanced Braking Technology on September 12, 2024 and sell it today you would lose (0.30) from holding Advanced Braking Technology or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Advanced Braking Technology vs. Lithium Australia NL
Performance |
| Timeline |
| Advanced Braking Tec |
| Lithium Australia |
Advanced Braking and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Braking and Lithium Australia
The main advantage of trading using opposite Advanced Braking and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Braking position performs unexpectedly, Lithium Australia 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 Lithium Australia will offset losses from the drop in Lithium Australia's long position.| Advanced Braking vs. Perseus Mining | Advanced Braking vs. Sandon Capital Investments | Advanced Braking vs. Alto Metals | Advanced Braking vs. Black Rock Mining |
| Lithium Australia vs. Australian Strategic Materials | Lithium Australia vs. Dalaroo Metals | Lithium Australia vs. MetalsGrove Mining | Lithium Australia vs. Carawine Resources Limited |
Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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