Correlation Between Lithium Americas and Teck Resources
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Teck Resources 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 Lithium Americas and Teck Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Americas Corp and Teck Resources Limited, you can compare the effects of market volatilities on Lithium Americas and Teck Resources 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 Lithium Americas with a short position of Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Teck Resources.
Diversification Opportunities for Lithium Americas and Teck Resources
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithium and Teck is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Teck Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and Lithium Americas 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 Lithium Americas Corp are associated (or correlated) with Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Lithium Americas i.e., Lithium Americas and Teck Resources go up and down completely randomly.
Pair Corralation between Lithium Americas and Teck Resources
Assuming the 90 days trading horizon Lithium Americas is expected to generate 4.57 times less return on investment than Teck Resources. In addition to that, Lithium Americas is 1.84 times more volatile than Teck Resources Limited. It trades about 0.0 of its total potential returns per unit of risk. Teck Resources Limited is currently generating about 0.03 per unit of volatility. If you would invest 6,478 in Teck Resources Limited on September 1, 2024 and sell it today you would earn a total of 59.00 from holding Teck Resources Limited or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Americas Corp vs. Teck Resources Limited
Performance |
| Timeline |
| Lithium Americas Corp |
| Teck Resources |
Lithium Americas and Teck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and Teck Resources
The main advantage of trading using opposite Lithium Americas and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Teck Resources 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 Teck Resources will offset losses from the drop in Teck Resources' long position.| Lithium Americas vs. Medical Facilities | Lithium Americas vs. Ocumetics Technology Corp | Lithium Americas vs. Birchtech Corp | Lithium Americas vs. High Liner Foods |
| Teck Resources vs. First Quantum Minerals | Teck Resources vs. Nutrien | Teck Resources vs. Lundin Mining | Teck Resources vs. Wheaton Precious Metals |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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