Correlation Between Lithium Australia and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Frontier Lithium 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 Frontier Lithium 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 Frontier Lithium, you can compare the effects of market volatilities on Lithium Australia and Frontier Lithium 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 Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Frontier Lithium.
Diversification Opportunities for Lithium Australia and Frontier Lithium
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithium and Frontier is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of Lithium Australia i.e., Lithium Australia and Frontier Lithium go up and down completely randomly.
Pair Corralation between Lithium Australia and Frontier Lithium
Assuming the 90 days horizon Lithium Australia NL is expected to generate 3.48 times more return on investment than Frontier Lithium. However, Lithium Australia is 3.48 times more volatile than Frontier Lithium. It trades about 0.07 of its potential returns per unit of risk. Frontier Lithium is currently generating about -0.07 per unit of risk. If you would invest 0.78 in Lithium Australia NL on September 1, 2024 and sell it today you would lose (0.08) from holding Lithium Australia NL or give up 10.26% 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. Frontier Lithium
Performance |
| Timeline |
| Lithium Australia |
| Frontier Lithium |
Lithium Australia and Frontier Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Frontier Lithium
The main advantage of trading using opposite Lithium Australia and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Frontier Lithium 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.| Lithium Australia vs. ATT Inc | Lithium Australia vs. Merck Company | Lithium Australia vs. Walt Disney | Lithium Australia vs. Caterpillar |
| Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core Lithium |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |