Correlation Between Lithium South and Gen III
Can any of the company-specific risk be diversified away by investing in both Lithium South and Gen III 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 South and Gen III into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium South Development and Gen III Oil, you can compare the effects of market volatilities on Lithium South and Gen III 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 South with a short position of Gen III. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium South and Gen III.
Diversification Opportunities for Lithium South and Gen III
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithium and Gen is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lithium South Development and Gen III Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen III Oil and Lithium South 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 South Development are associated (or correlated) with Gen III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen III Oil has no effect on the direction of Lithium South i.e., Lithium South and Gen III go up and down completely randomly.
Pair Corralation between Lithium South and Gen III
Assuming the 90 days horizon Lithium South Development is expected to under-perform the Gen III. But the stock apears to be less risky and, when comparing its historical volatility, Lithium South Development is 1.05 times less risky than Gen III. The stock trades about -0.03 of its potential returns per unit of risk. The Gen III Oil is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 80.00 in Gen III Oil on August 28, 2024 and sell it today you would lose (55.00) from holding Gen III Oil or give up 68.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium South Development vs. Gen III Oil
Performance |
| Timeline |
| Lithium South Development |
| Gen III Oil |
Lithium South and Gen III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium South and Gen III
The main advantage of trading using opposite Lithium South and Gen III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium South position performs unexpectedly, Gen III 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 Gen III will offset losses from the drop in Gen III's long position.| Lithium South vs. Lithium Chile | Lithium South vs. Frontier Lithium | Lithium South vs. Argentina Lithium Energy | Lithium South vs. Critical Elements |
| Gen III vs. Tsodilo Resources Limited | Gen III vs. Wildsky Resources | Gen III vs. Chatham Rock Phosphate | Gen III vs. Golden Pursuit 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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