Correlation Between Lithium Americas and Piedmont Lithium
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Piedmont Lithium 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 Piedmont Lithium 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 Piedmont Lithium Ltd, you can compare the effects of market volatilities on Lithium Americas and Piedmont Lithium 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 Piedmont Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Piedmont Lithium.
Diversification Opportunities for Lithium Americas and Piedmont Lithium
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lithium and Piedmont is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium 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 Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Lithium Americas i.e., Lithium Americas and Piedmont Lithium go up and down completely randomly.
Pair Corralation between Lithium Americas and Piedmont Lithium
Considering the 90-day investment horizon Lithium Americas Corp is expected to generate 1.13 times more return on investment than Piedmont Lithium. However, Lithium Americas is 1.13 times more volatile than Piedmont Lithium Ltd. It trades about 0.0 of its potential returns per unit of risk. Piedmont Lithium Ltd is currently generating about -0.08 per unit of risk. If you would invest 306.00 in Lithium Americas Corp on November 2, 2024 and sell it today you would lose (4.00) from holding Lithium Americas Corp or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Americas Corp vs. Piedmont Lithium Ltd
Performance |
| Timeline |
| Lithium Americas Corp |
| Piedmont Lithium |
Lithium Americas and Piedmont Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and Piedmont Lithium
The main advantage of trading using opposite Lithium Americas and Piedmont Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Piedmont Lithium 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 Piedmont Lithium will offset losses from the drop in Piedmont Lithium's 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 |
| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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