Correlation Between Lithium Australia and Bravada Gold
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Bravada Gold 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 Bravada Gold 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 Bravada Gold, you can compare the effects of market volatilities on Lithium Australia and Bravada Gold 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 Bravada Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Bravada Gold.
Diversification Opportunities for Lithium Australia and Bravada Gold
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithium and Bravada is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Bravada Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravada Gold 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 Bravada Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravada Gold has no effect on the direction of Lithium Australia i.e., Lithium Australia and Bravada Gold go up and down completely randomly.
Pair Corralation between Lithium Australia and Bravada Gold
Assuming the 90 days horizon Lithium Australia NL is expected to generate 5.55 times more return on investment than Bravada Gold. However, Lithium Australia is 5.55 times more volatile than Bravada Gold. It trades about 0.07 of its potential returns per unit of risk. Bravada Gold is currently generating about 0.06 per unit of risk. If you would invest 1.79 in Lithium Australia NL on December 11, 2024 and sell it today you would lose (1.24) from holding Lithium Australia NL or give up 69.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Bravada Gold
Performance |
| Timeline |
| Lithium Australia |
| Bravada Gold |
Lithium Australia and Bravada Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Bravada Gold
The main advantage of trading using opposite Lithium Australia and Bravada Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Bravada Gold 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 Bravada Gold will offset losses from the drop in Bravada Gold's long position.| Lithium Australia vs. Grid Metals Corp | ||
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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