Correlation Between Bravada Gold and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Bravada Gold 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 Bravada Gold and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bravada Gold and Lithium Australia NL, you can compare the effects of market volatilities on Bravada Gold 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 Bravada Gold with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bravada Gold and Lithium Australia.
Diversification Opportunities for Bravada Gold and Lithium Australia
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bravada and Lithium is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bravada Gold and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Bravada Gold 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 Bravada Gold 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 Bravada Gold i.e., Bravada Gold and Lithium Australia go up and down completely randomly.
Pair Corralation between Bravada Gold and Lithium Australia
Assuming the 90 days horizon Bravada Gold is expected to generate 7.16 times less return on investment than Lithium Australia. But when comparing it to its historical volatility, Bravada Gold is 4.57 times less risky than Lithium Australia. It trades about 0.03 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.77 in Lithium Australia NL on August 29, 2024 and sell it today you would lose (2.27) from holding Lithium Australia NL or give up 60.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bravada Gold vs. Lithium Australia NL
Performance |
| Timeline |
| Bravada Gold |
| Lithium Australia |
Bravada Gold and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bravada Gold and Lithium Australia
The main advantage of trading using opposite Bravada Gold and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bravada Gold 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.| Bravada Gold vs. Golden Goliath Resources | Bravada Gold vs. Canada Rare Earth | Bravada Gold vs. First American Silver | Bravada Gold vs. Horizonte Minerals Plc |
| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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