Correlation Between Australian Strategic and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Australian Strategic 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 Australian Strategic and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Strategic Materials and Lithium Australia NL, you can compare the effects of market volatilities on Australian Strategic 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 Australian Strategic with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Strategic and Lithium Australia.
Diversification Opportunities for Australian Strategic and Lithium Australia
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Australian and Lithium is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Australian Strategic 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 Australian Strategic Materials 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 Australian Strategic i.e., Australian Strategic and Lithium Australia go up and down completely randomly.
Pair Corralation between Australian Strategic and Lithium Australia
Assuming the 90 days horizon Australian Strategic Materials is expected to under-perform the Lithium Australia. But the pink sheet apears to be less risky and, when comparing its historical volatility, Australian Strategic Materials is 38.94 times less risky than Lithium Australia. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Lithium Australia NL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Lithium Australia NL on August 25, 2024 and sell it today you would earn a total of 1.14 from holding Lithium Australia NL or generate 11400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Strategic Materials vs. Lithium Australia NL
Performance |
| Timeline |
| Australian Strategic |
| Lithium Australia |
Australian Strategic and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Strategic and Lithium Australia
The main advantage of trading using opposite Australian Strategic and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Strategic 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.| Australian Strategic vs. Norra Metals Corp | Australian Strategic vs. ZincX Resources Corp | Australian Strategic vs. Nuinsco Resources Limited | Australian Strategic vs. South Star Battery |
| Lithium Australia vs. Norra Metals Corp | Lithium Australia vs. ZincX Resources Corp | Lithium Australia vs. Nuinsco Resources Limited | Lithium Australia vs. South Star Battery |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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