Correlation Between Foraco International and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Foraco International 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 Foraco International and Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foraco International SA and Standard Lithium, you can compare the effects of market volatilities on Foraco International 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 Foraco International with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and Standard Lithium.
Diversification Opportunities for Foraco International and Standard Lithium
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Foraco and Standard is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and Foraco International 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 Foraco International SA 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 Foraco International i.e., Foraco International and Standard Lithium go up and down completely randomly.
Pair Corralation between Foraco International and Standard Lithium
Assuming the 90 days trading horizon Foraco International SA is expected to under-perform the Standard Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Foraco International SA is 3.01 times less risky than Standard Lithium. The stock trades about -0.03 of its potential returns per unit of risk. The Standard Lithium is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 199.00 in Standard Lithium on October 20, 2024 and sell it today you would earn a total of 37.00 from holding Standard Lithium or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foraco International SA vs. Standard Lithium
Performance |
| Timeline |
| Foraco International |
| Standard Lithium |
Foraco International and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foraco International and Standard Lithium
The main advantage of trading using opposite Foraco International and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foraco International 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.| Foraco International vs. Orbit Garant Drilling | Foraco International vs. Geodrill Limited | Foraco International vs. Mccoy Global | Foraco International vs. Bri Chem Corp |
| Standard Lithium vs. First Majestic Silver | Standard Lithium vs. Ivanhoe Energy | Standard Lithium vs. Flinders Resources Limited | Standard Lithium vs. Orezone Gold 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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