Correlation Between Snow Lake and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Snow Lake and Standard 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 Snow Lake and Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snow Lake Resources and Standard Lithium, you can compare the effects of market volatilities on Snow Lake and Standard 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 Snow Lake with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snow Lake and Standard Lithium.
Diversification Opportunities for Snow Lake and Standard Lithium
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Snow and Standard is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Snow Lake Resources and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and Snow Lake 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 Snow Lake Resources are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Snow Lake i.e., Snow Lake and Standard Lithium go up and down completely randomly.
Pair Corralation between Snow Lake and Standard Lithium
Given the investment horizon of 90 days Snow Lake Resources is expected to under-perform the Standard Lithium. In addition to that, Snow Lake is 1.15 times more volatile than Standard Lithium. It trades about -0.44 of its total potential returns per unit of risk. Standard Lithium is currently generating about -0.36 per unit of volatility. If you would invest 251.00 in Standard Lithium on August 31, 2024 and sell it today you would lose (82.00) from holding Standard Lithium or give up 32.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snow Lake Resources vs. Standard Lithium
Performance |
| Timeline |
| Snow Lake Resources |
| Standard Lithium |
Snow Lake and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snow Lake and Standard Lithium
The main advantage of trading using opposite Snow Lake and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snow Lake position performs unexpectedly, Standard 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| Snow Lake vs. Core Lithium | Snow Lake vs. Patriot Battery Metals | Snow Lake vs. Lomiko Metals | Snow Lake vs. Vulcan Energy Resources |
| Standard Lithium vs. Lithium Americas Corp | Standard Lithium vs. Piedmont Lithium Ltd | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Teck Resources Ltd |
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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