Correlation Between Fortescue Metals and Lithium Corp
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and Lithium Corp 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 Fortescue Metals and Lithium Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Lithium Corp, you can compare the effects of market volatilities on Fortescue Metals and Lithium Corp 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 Fortescue Metals with a short position of Lithium Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Lithium Corp.
Diversification Opportunities for Fortescue Metals and Lithium Corp
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fortescue and Lithium is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Corp and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with Lithium Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Corp has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Lithium Corp go up and down completely randomly.
Pair Corralation between Fortescue Metals and Lithium Corp
Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the Lithium Corp. But the otc stock apears to be less risky and, when comparing its historical volatility, Fortescue Metals Group is 3.05 times less risky than Lithium Corp. The otc stock trades about -0.03 of its potential returns per unit of risk. The Lithium Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4.40 in Lithium Corp on November 9, 2024 and sell it today you would lose (1.10) from holding Lithium Corp or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.64% |
| Values | Daily Returns |
Fortescue Metals Group vs. Lithium Corp
Performance |
| Timeline |
| Fortescue Metals |
| Lithium Corp |
Fortescue Metals and Lithium Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Lithium Corp
The main advantage of trading using opposite Fortescue Metals and Lithium Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals position performs unexpectedly, Lithium Corp 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 Corp will offset losses from the drop in Lithium Corp's long position.| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources Limited |
| Lithium Corp vs. Commerce Resources Corp | Lithium Corp vs. Great Western Minerals | Lithium Corp vs. Silver Elephant Mining | Lithium Corp vs. Eskay Mining 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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