Correlation Between Global Energy and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Global Energy 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 Global Energy and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Energy Metals and Lithium Australia NL, you can compare the effects of market volatilities on Global Energy 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 Global Energy with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Energy and Lithium Australia.
Diversification Opportunities for Global Energy and Lithium Australia
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Lithium is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Global Energy 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 Global Energy Metals 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 Global Energy i.e., Global Energy and Lithium Australia go up and down completely randomly.
Pair Corralation between Global Energy and Lithium Australia
Assuming the 90 days horizon Global Energy Metals is expected to generate 0.98 times more return on investment than Lithium Australia. However, Global Energy Metals is 1.02 times less risky than Lithium Australia. It trades about 0.13 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.01 per unit of risk. If you would invest 1.00 in Global Energy Metals on August 29, 2024 and sell it today you would earn a total of 0.23 from holding Global Energy Metals or generate 23.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Global Energy Metals vs. Lithium Australia NL
Performance |
| Timeline |
| Global Energy Metals |
| Lithium Australia |
Global Energy and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Energy and Lithium Australia
The main advantage of trading using opposite Global Energy and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Energy 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.| Global Energy vs. Rockridge Resources | Global Energy vs. Ameriwest Lithium | Global Energy vs. Osisko Metals Incorporated | Global Energy vs. Volt Lithium Corp |
| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO Limited |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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