Correlation Between Frontier Lithium and E3 Lithium
Can any of the company-specific risk be diversified away by investing in both Frontier Lithium and E3 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 Frontier Lithium and E3 Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Lithium and E3 Lithium, you can compare the effects of market volatilities on Frontier Lithium and E3 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 Frontier Lithium with a short position of E3 Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Lithium and E3 Lithium.
Diversification Opportunities for Frontier Lithium and E3 Lithium
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Frontier and ETL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and E3 Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 Lithium and Frontier 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 Frontier Lithium are associated (or correlated) with E3 Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Lithium has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and E3 Lithium go up and down completely randomly.
Pair Corralation between Frontier Lithium and E3 Lithium
Given the investment horizon of 90 days Frontier Lithium is expected to generate 1.34 times more return on investment than E3 Lithium. However, Frontier Lithium is 1.34 times more volatile than E3 Lithium. It trades about -0.14 of its potential returns per unit of risk. E3 Lithium is currently generating about -0.33 per unit of risk. If you would invest 58.00 in Frontier Lithium on August 24, 2024 and sell it today you would lose (6.00) from holding Frontier Lithium or give up 10.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Lithium vs. E3 Lithium
Performance |
| Timeline |
| Frontier Lithium |
| E3 Lithium |
Frontier Lithium and E3 Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Lithium and E3 Lithium
The main advantage of trading using opposite Frontier Lithium and E3 Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Lithium position performs unexpectedly, E3 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 E3 Lithium will offset losses from the drop in E3 Lithium's long position.| Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Rock Tech Lithium | Frontier Lithium vs. American Lithium Corp | Frontier Lithium vs. American Manganese |
| E3 Lithium vs. Frontier Lithium | E3 Lithium vs. Sigma Lithium Resources | E3 Lithium vs. Standard Lithium | E3 Lithium vs. LithiumBank Resources 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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