Correlation Between E3 Lithium and Canada Nickel
Can any of the company-specific risk be diversified away by investing in both E3 Lithium and Canada Nickel 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 E3 Lithium and Canada Nickel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E3 Lithium and Canada Nickel, you can compare the effects of market volatilities on E3 Lithium and Canada Nickel 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 E3 Lithium with a short position of Canada Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of E3 Lithium and Canada Nickel.
Diversification Opportunities for E3 Lithium and Canada Nickel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between ETL and Canada is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding E3 Lithium and Canada Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Nickel and E3 Lithium 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 E3 Lithium are associated (or correlated) with Canada Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Nickel has no effect on the direction of E3 Lithium i.e., E3 Lithium and Canada Nickel go up and down completely randomly.
Pair Corralation between E3 Lithium and Canada Nickel
Assuming the 90 days horizon E3 Lithium is expected to under-perform the Canada Nickel. In addition to that, E3 Lithium is 1.18 times more volatile than Canada Nickel. It trades about -0.11 of its total potential returns per unit of risk. Canada Nickel is currently generating about -0.1 per unit of volatility. If you would invest 104.00 in Canada Nickel on August 28, 2024 and sell it today you would lose (6.00) from holding Canada Nickel or give up 5.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E3 Lithium vs. Canada Nickel
Performance |
| Timeline |
| E3 Lithium |
| Canada Nickel |
E3 Lithium and Canada Nickel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E3 Lithium and Canada Nickel
The main advantage of trading using opposite E3 Lithium and Canada Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E3 Lithium position performs unexpectedly, Canada Nickel 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 Canada Nickel will offset losses from the drop in Canada Nickel's long position.| E3 Lithium vs. Frontier Lithium | E3 Lithium vs. Sigma Lithium Resources | E3 Lithium vs. Standard Lithium | E3 Lithium vs. LithiumBank Resources Corp |
| Canada Nickel vs. First Majestic Silver | Canada Nickel vs. Ivanhoe Energy | Canada Nickel vs. Orezone Gold Corp | Canada Nickel vs. Faraday Copper Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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