Correlation Between Lithium Australia and Global Energy
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Global Energy 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 Global Energy 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 Global Energy Metals, you can compare the effects of market volatilities on Lithium Australia and Global Energy 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 Global Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Global Energy.
Diversification Opportunities for Lithium Australia and Global Energy
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithium and Global is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Global Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Energy Metals 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 Global Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Energy Metals has no effect on the direction of Lithium Australia i.e., Lithium Australia and Global Energy go up and down completely randomly.
Pair Corralation between Lithium Australia and Global Energy
Assuming the 90 days horizon Lithium Australia NL is expected to generate 1.4 times more return on investment than Global Energy. However, Lithium Australia is 1.4 times more volatile than Global Energy Metals. It trades about 0.01 of its potential returns per unit of risk. Global Energy Metals is currently generating about -0.08 per unit of risk. If you would invest 1.40 in Lithium Australia NL on August 25, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Global Energy Metals
Performance |
| Timeline |
| Lithium Australia |
| Global Energy Metals |
Lithium Australia and Global Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Global Energy
The main advantage of trading using opposite Lithium Australia and Global Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Global Energy 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 Global Energy will offset losses from the drop in Global Energy's long position.| Lithium Australia vs. Norra Metals Corp | Lithium Australia vs. ZincX Resources Corp | Lithium Australia vs. Nuinsco Resources Limited | Lithium Australia vs. South Star Battery |
| Global Energy vs. Norra Metals Corp | Global Energy vs. ZincX Resources Corp | Global Energy vs. Nuinsco Resources Limited | Global Energy vs. South Star Battery |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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