Correlation Between KWG Resources and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both KWG Resources and Lithium Americas 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 KWG Resources and Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KWG Resources and Lithium Americas Corp, you can compare the effects of market volatilities on KWG Resources and Lithium Americas 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 KWG Resources with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of KWG Resources and Lithium Americas.
Diversification Opportunities for KWG Resources and Lithium Americas
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KWG and Lithium is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding KWG Resources and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and KWG Resources 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 KWG Resources are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of KWG Resources i.e., KWG Resources and Lithium Americas go up and down completely randomly.
Pair Corralation between KWG Resources and Lithium Americas
Assuming the 90 days horizon KWG Resources is expected to under-perform the Lithium Americas. In addition to that, KWG Resources is 1.47 times more volatile than Lithium Americas Corp. It trades about -0.03 of its total potential returns per unit of risk. Lithium Americas Corp is currently generating about 0.13 per unit of volatility. If you would invest 341.00 in Lithium Americas Corp on August 25, 2024 and sell it today you would earn a total of 47.00 from holding Lithium Americas Corp or generate 13.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KWG Resources vs. Lithium Americas Corp
Performance |
| Timeline |
| KWG Resources |
| Lithium Americas Corp |
KWG Resources and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KWG Resources and Lithium Americas
The main advantage of trading using opposite KWG Resources and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KWG Resources position performs unexpectedly, Lithium Americas 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 Americas will offset losses from the drop in Lithium Americas' long position.| KWG Resources vs. Metals X Limited | KWG Resources vs. Largo Resources | KWG Resources vs. Sigma Lithium Resources | KWG Resources vs. Horizon Minerals Corp |
| Lithium Americas vs. Vale SA ADR | Lithium Americas vs. Teck Resources Ltd | Lithium Americas vs. MP Materials Corp | Lithium Americas vs. BHP Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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