Correlation Between Lithium Australia and Snow Lake
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Snow Lake 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 Snow Lake 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 Snow Lake Resources, you can compare the effects of market volatilities on Lithium Australia and Snow Lake 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 Snow Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Snow Lake.
Diversification Opportunities for Lithium Australia and Snow Lake
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lithium and Snow is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Snow Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Lake Resources 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 Snow Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Lake Resources has no effect on the direction of Lithium Australia i.e., Lithium Australia and Snow Lake go up and down completely randomly.
Pair Corralation between Lithium Australia and Snow Lake
Assuming the 90 days horizon Lithium Australia is expected to generate 9.23 times less return on investment than Snow Lake. But when comparing it to its historical volatility, Lithium Australia NL is 5.04 times less risky than Snow Lake. It trades about 0.15 of its potential returns per unit of risk. Snow Lake Resources is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 37.00 in Snow Lake Resources on October 21, 2024 and sell it today you would earn a total of 52.00 from holding Snow Lake Resources or generate 140.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Snow Lake Resources
Performance |
| Timeline |
| Lithium Australia |
| Snow Lake Resources |
Lithium Australia and Snow Lake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Snow Lake
The main advantage of trading using opposite Lithium Australia and Snow Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Snow Lake 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 Snow Lake will offset losses from the drop in Snow Lake'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 |
| Snow Lake vs. Core Lithium | Snow Lake vs. Patriot Battery Metals | Snow Lake vs. Lomiko Metals | Snow Lake vs. Vulcan Energy Resources |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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