Correlation Between Lithium Australia and Pershing Resources
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Pershing Resources 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 Pershing Resources 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 Pershing Resources, you can compare the effects of market volatilities on Lithium Australia and Pershing Resources 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 Pershing Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Pershing Resources.
Diversification Opportunities for Lithium Australia and Pershing Resources
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lithium and Pershing is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Pershing Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing 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 Pershing Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Resources has no effect on the direction of Lithium Australia i.e., Lithium Australia and Pershing Resources go up and down completely randomly.
Pair Corralation between Lithium Australia and Pershing Resources
Assuming the 90 days horizon Lithium Australia NL is expected to generate 2.84 times more return on investment than Pershing Resources. However, Lithium Australia is 2.84 times more volatile than Pershing Resources. It trades about 0.05 of its potential returns per unit of risk. Pershing Resources is currently generating about 0.06 per unit of risk. If you would invest 3.77 in Lithium Australia NL on August 29, 2024 and sell it today you would lose (2.27) from holding Lithium Australia NL or give up 60.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Pershing Resources
Performance |
| Timeline |
| Lithium Australia |
| Pershing Resources |
Lithium Australia and Pershing Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Pershing Resources
The main advantage of trading using opposite Lithium Australia and Pershing Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Pershing Resources 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 Pershing Resources will offset losses from the drop in Pershing Resources' long position.| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO Limited |
| Pershing Resources vs. Rockridge Resources | Pershing Resources vs. Ameriwest Lithium | Pershing Resources vs. Osisko Metals Incorporated | Pershing Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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