Correlation Between Frontier Lithium and Rock Tech
Can any of the company-specific risk be diversified away by investing in both Frontier Lithium and Rock Tech 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 Frontier Lithium and Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Lithium and Rock Tech Lithium, you can compare the effects of market volatilities on Frontier Lithium and Rock Tech 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 Frontier Lithium with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Lithium and Rock Tech.
Diversification Opportunities for Frontier Lithium and Rock Tech
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Frontier and Rock is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and Frontier Lithium 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 Frontier Lithium are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and Rock Tech go up and down completely randomly.
Pair Corralation between Frontier Lithium and Rock Tech
Assuming the 90 days horizon Frontier Lithium is expected to generate 0.82 times more return on investment than Rock Tech. However, Frontier Lithium is 1.23 times less risky than Rock Tech. It trades about -0.15 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.13 per unit of risk. If you would invest 42.00 in Frontier Lithium on August 30, 2024 and sell it today you would lose (7.00) from holding Frontier Lithium or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Lithium vs. Rock Tech Lithium
Performance |
| Timeline |
| Frontier Lithium |
| Rock Tech Lithium |
Frontier Lithium and Rock Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Lithium and Rock Tech
The main advantage of trading using opposite Frontier Lithium and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Lithium position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.| Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core Lithium |
| Rock Tech vs. Rockridge Resources | Rock Tech vs. Ameriwest Lithium | Rock Tech vs. Osisko Metals Incorporated | Rock Tech vs. Volt Lithium Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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