Correlation Between Lithium Americas and Red Moon
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Red Moon 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 Red Moon 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 Red Moon Resources, you can compare the effects of market volatilities on Lithium Americas and Red Moon 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 Red Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Red Moon.
Diversification Opportunities for Lithium Americas and Red Moon
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lithium and Red is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Lithium Americas i.e., Lithium Americas and Red Moon go up and down completely randomly.
Pair Corralation between Lithium Americas and Red Moon
Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the Red Moon. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.15 times less risky than Red Moon. The stock trades about -0.14 of its potential returns per unit of risk. The Red Moon Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Red Moon Resources on December 1, 2024 and sell it today you would earn a total of 0.00 from holding Red Moon Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Americas Corp vs. Red Moon Resources
Performance |
| Timeline |
| Lithium Americas Corp |
| Red Moon Resources |
Lithium Americas and Red Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and Red Moon
The main advantage of trading using opposite Lithium Americas and Red Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Red Moon 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 Red Moon will offset losses from the drop in Red Moon'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 |
| Red Moon vs. Aurwest Resources | Red Moon vs. Benton Resources | Red Moon vs. Pan Global Resources | Red Moon vs. Tower Resources |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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