Correlation Between Lithium Australia and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Mount Gibson 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 Mount Gibson 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 Mount Gibson Iron, you can compare the effects of market volatilities on Lithium Australia and Mount Gibson 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 Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Mount Gibson.
Diversification Opportunities for Lithium Australia and Mount Gibson
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lithium and Mount is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron 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 Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Lithium Australia i.e., Lithium Australia and Mount Gibson go up and down completely randomly.
Pair Corralation between Lithium Australia and Mount Gibson
Assuming the 90 days trading horizon Lithium Australia NL is expected to under-perform the Mount Gibson. In addition to that, Lithium Australia is 1.21 times more volatile than Mount Gibson Iron. It trades about 0.0 of its total potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.0 per unit of volatility. If you would invest 32.00 in Mount Gibson Iron on September 3, 2024 and sell it today you would lose (1.00) from holding Mount Gibson Iron or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Mount Gibson Iron
Performance |
| Timeline |
| Lithium Australia |
| Mount Gibson Iron |
Lithium Australia and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Mount Gibson
The main advantage of trading using opposite Lithium Australia and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Lithium Australia vs. Mount Gibson Iron | Lithium Australia vs. Phoslock Environmental Technologies | Lithium Australia vs. Champion Iron | Lithium Australia vs. Iron Road |
| Mount Gibson vs. Northern Star Resources | Mount Gibson vs. Evolution Mining | Mount Gibson vs. Bluescope Steel | Mount Gibson vs. Aneka Tambang Tbk |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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