Correlation Between Lithium Americas and European Metals
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and European Metals 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 European Metals 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 European Metals Holdings, you can compare the effects of market volatilities on Lithium Americas and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and European Metals.
Diversification Opportunities for Lithium Americas and European Metals
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithium and European is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Lithium Americas i.e., Lithium Americas and European Metals go up and down completely randomly.
Pair Corralation between Lithium Americas and European Metals
Considering the 90-day investment horizon Lithium Americas Corp is expected to generate 0.41 times more return on investment than European Metals. However, Lithium Americas Corp is 2.44 times less risky than European Metals. It trades about -0.04 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.12 per unit of risk. If you would invest 420.00 in Lithium Americas Corp on September 3, 2024 and sell it today you would lose (21.00) from holding Lithium Americas Corp or give up 5.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Americas Corp vs. European Metals Holdings
Performance |
| Timeline |
| Lithium Americas Corp |
| European Metals Holdings |
Lithium Americas and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and European Metals
The main advantage of trading using opposite Lithium Americas and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Lithium Americas vs. Sigma Lithium Resources | Lithium Americas vs. Standard Lithium | Lithium Americas vs. Sayona Mining Limited | Lithium Americas vs. MP Materials Corp |
| European Metals vs. Qubec Nickel Corp | European Metals vs. IGO Limited | European Metals vs. Avarone Metals | European Metals vs. Adriatic Metals PLC |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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