Correlation Between Lithium Australia and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Advanced Braking 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 Australia and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Australia NL and Advanced Braking Technology, you can compare the effects of market volatilities on Lithium Australia and Advanced Braking 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 Australia with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Advanced Braking.
Diversification Opportunities for Lithium Australia and Advanced Braking
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lithium and Advanced is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Lithium Australia 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 Australia NL are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Lithium Australia i.e., Lithium Australia and Advanced Braking go up and down completely randomly.
Pair Corralation between Lithium Australia and Advanced Braking
Assuming the 90 days trading horizon Lithium Australia NL is expected to under-perform the Advanced Braking. In addition to that, Lithium Australia is 1.1 times more volatile than Advanced Braking Technology. It trades about -0.26 of its total potential returns per unit of risk. Advanced Braking Technology is currently generating about -0.04 per unit of volatility. If you would invest 8.50 in Advanced Braking Technology on September 12, 2024 and sell it today you would lose (0.30) from holding Advanced Braking Technology or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lithium Australia NL vs. Advanced Braking Technology
Performance |
| Timeline |
| Lithium Australia |
| Advanced Braking Tec |
Lithium Australia and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Advanced Braking
The main advantage of trading using opposite Lithium Australia and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Advanced Braking 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 Advanced Braking will offset losses from the drop in Advanced Braking's long position.| Lithium Australia vs. Australian Strategic Materials | Lithium Australia vs. Dalaroo Metals | Lithium Australia vs. MetalsGrove Mining | Lithium Australia vs. Carawine Resources Limited |
| Advanced Braking vs. Perseus Mining | Advanced Braking vs. Sandon Capital Investments | Advanced Braking vs. Alto Metals | Advanced Braking vs. Black Rock Mining |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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