Correlation Between Lithium Australia and Australian Strategic
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Australian Strategic 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 Australian Strategic 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 Australian Strategic Materials, you can compare the effects of market volatilities on Lithium Australia and Australian Strategic 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 Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Australian Strategic.
Diversification Opportunities for Lithium Australia and Australian Strategic
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lithium and Australian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Lithium Australia i.e., Lithium Australia and Australian Strategic go up and down completely randomly.
Pair Corralation between Lithium Australia and Australian Strategic
Assuming the 90 days horizon Lithium Australia NL is expected to generate 3.86 times more return on investment than Australian Strategic. However, Lithium Australia is 3.86 times more volatile than Australian Strategic Materials. It trades about 0.01 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.38 per unit of risk. If you would invest 1.40 in Lithium Australia NL on August 29, 2024 and sell it today you would lose (0.25) from holding Lithium Australia NL or give up 17.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lithium Australia NL vs. Australian Strategic Materials
Performance |
| Timeline |
| Lithium Australia |
| Australian Strategic |
Lithium Australia and Australian Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Australian Strategic
The main advantage of trading using opposite Lithium Australia and Australian Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Australian Strategic 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 Australian Strategic will offset losses from the drop in Australian Strategic's long position.| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO Limited |
| Australian Strategic vs. Rockridge Resources | Australian Strategic vs. Ameriwest Lithium | Australian Strategic vs. Osisko Metals Incorporated | Australian Strategic 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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