Correlation Between Lithium Americas and Compass Minerals
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Compass Minerals 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 Compass Minerals 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 Compass Minerals International, you can compare the effects of market volatilities on Lithium Americas and Compass Minerals 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 Compass Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Compass Minerals.
Diversification Opportunities for Lithium Americas and Compass Minerals
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithium and Compass is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int 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 Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Lithium Americas i.e., Lithium Americas and Compass Minerals go up and down completely randomly.
Pair Corralation between Lithium Americas and Compass Minerals
Considering the 90-day investment horizon Lithium Americas Corp is expected to generate 1.26 times more return on investment than Compass Minerals. However, Lithium Americas is 1.26 times more volatile than Compass Minerals International. It trades about -0.01 of its potential returns per unit of risk. Compass Minerals International is currently generating about -0.03 per unit of risk. If you would invest 671.00 in Lithium Americas Corp on August 25, 2024 and sell it today you would lose (283.00) from holding Lithium Americas Corp or give up 42.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Lithium Americas Corp vs. Compass Minerals International
Performance |
| Timeline |
| Lithium Americas Corp |
| Compass Minerals Int |
Lithium Americas and Compass Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and Compass Minerals
The main advantage of trading using opposite Lithium Americas and Compass Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Compass Minerals 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 Compass Minerals will offset losses from the drop in Compass Minerals' long position.| Lithium Americas vs. Vale SA ADR | Lithium Americas vs. Teck Resources Ltd | Lithium Americas vs. MP Materials Corp | Lithium Americas vs. BHP Group Limited |
| Compass Minerals vs. Vale SA ADR | Compass Minerals vs. Teck Resources Ltd | Compass Minerals vs. MP Materials Corp | Compass Minerals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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