Correlation Between Compass Minerals and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Compass Minerals and Standard Lithium 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 Compass Minerals and Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Minerals International and Standard Lithium, you can compare the effects of market volatilities on Compass Minerals and Standard Lithium 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 Compass Minerals with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Minerals and Standard Lithium.
Diversification Opportunities for Compass Minerals and Standard Lithium
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compass and Standard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Compass Minerals International and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and Compass 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 Compass Minerals International are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Compass Minerals i.e., Compass Minerals and Standard Lithium go up and down completely randomly.
Pair Corralation between Compass Minerals and Standard Lithium
Considering the 90-day investment horizon Compass Minerals International is expected to generate 1.05 times more return on investment than Standard Lithium. However, Compass Minerals is 1.05 times more volatile than Standard Lithium. It trades about 0.09 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.19 per unit of risk. If you would invest 1,359 in Compass Minerals International on August 24, 2024 and sell it today you would earn a total of 111.00 from holding Compass Minerals International or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Compass Minerals International vs. Standard Lithium
Performance |
| Timeline |
| Compass Minerals Int |
| Standard Lithium |
Compass Minerals and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Minerals and Standard Lithium
The main advantage of trading using opposite Compass Minerals and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Minerals position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| Compass Minerals vs. MP Materials Corp | Compass Minerals vs. NioCorp Developments Ltd | Compass Minerals vs. Vale SA ADR | Compass Minerals vs. Vizsla Resources Corp |
| Standard Lithium vs. Lithium Americas Corp | Standard Lithium vs. Piedmont Lithium Ltd | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Teck Resources Ltd |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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