Correlation Between Flying Nickel and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Flying Nickel 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 Flying Nickel and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flying Nickel Mining and Lithium Australia NL, you can compare the effects of market volatilities on Flying Nickel 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 Flying Nickel with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flying Nickel and Lithium Australia.
Diversification Opportunities for Flying Nickel and Lithium Australia
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Flying and Lithium is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Flying Nickel Mining and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Flying Nickel 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 Flying Nickel Mining 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 Flying Nickel i.e., Flying Nickel and Lithium Australia go up and down completely randomly.
Pair Corralation between Flying Nickel and Lithium Australia
Assuming the 90 days horizon Flying Nickel is expected to generate 6.04 times less return on investment than Lithium Australia. But when comparing it to its historical volatility, Flying Nickel Mining is 4.35 times less risky than Lithium Australia. It trades about 0.05 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.79 in Lithium Australia NL on December 11, 2024 and sell it today you would lose (1.24) from holding Lithium Australia NL or give up 69.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.1% |
| Values | Daily Returns |
Flying Nickel Mining vs. Lithium Australia NL
Performance |
| Timeline |
| Flying Nickel Mining |
Risk-Adjusted Performance
Insignificant
Weak | Strong |
| Lithium Australia |
Flying Nickel and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flying Nickel and Lithium Australia
The main advantage of trading using opposite Flying Nickel and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flying Nickel 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.| Flying Nickel vs. Euro Manganese | ||
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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