Correlation Between Lithium Chile and Argentina Lithium
Can any of the company-specific risk be diversified away by investing in both Lithium Chile and Argentina 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 Chile and Argentina Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Chile and Argentina Lithium Energy, you can compare the effects of market volatilities on Lithium Chile and Argentina 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 Chile with a short position of Argentina Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Chile and Argentina Lithium.
Diversification Opportunities for Lithium Chile and Argentina Lithium
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithium and Argentina is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Chile and Argentina Lithium Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentina Lithium Energy and Lithium Chile 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 Chile are associated (or correlated) with Argentina Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentina Lithium Energy has no effect on the direction of Lithium Chile i.e., Lithium Chile and Argentina Lithium go up and down completely randomly.
Pair Corralation between Lithium Chile and Argentina Lithium
Assuming the 90 days trading horizon Lithium Chile is expected to generate 0.65 times more return on investment than Argentina Lithium. However, Lithium Chile is 1.54 times less risky than Argentina Lithium. It trades about -0.01 of its potential returns per unit of risk. Argentina Lithium Energy is currently generating about -0.03 per unit of risk. If you would invest 65.00 in Lithium Chile on August 30, 2024 and sell it today you would lose (1.00) from holding Lithium Chile or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Chile vs. Argentina Lithium Energy
Performance |
| Timeline |
| Lithium Chile |
| Argentina Lithium Energy |
Lithium Chile and Argentina Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Chile and Argentina Lithium
The main advantage of trading using opposite Lithium Chile and Argentina Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Chile position performs unexpectedly, Argentina 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 Argentina Lithium will offset losses from the drop in Argentina Lithium's long position.| Lithium Chile vs. First Majestic Silver | Lithium Chile vs. Ivanhoe Energy | Lithium Chile vs. Orezone Gold Corp | Lithium Chile vs. Faraday Copper Corp |
| Argentina Lithium vs. Lithium Chile | Argentina Lithium vs. International Lithium Corp | Argentina Lithium vs. Noram Lithium Corp | Argentina Lithium vs. Imagine Lithium |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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