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
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortescue and Lithium is 0.37. 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 generate 0.34 times more return on investment than Lithium Corp. However, Fortescue Metals Group is 2.95 times less risky than Lithium Corp. It trades about -0.04 of its potential returns per unit of risk. Lithium Corp is currently generating about -0.08 per unit of risk. If you would invest 1,254 in Fortescue Metals Group on September 1, 2024 and sell it today you would lose (34.00) from holding Fortescue Metals Group or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| 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. Altura Mining Limited | Lithium Corp vs. Frontier Lithium | Lithium Corp vs. Savannah Resources Plc | Lithium Corp vs. Lithium Ionic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |