Correlation Between Lithium Australia and Winsome Resources
Can any of the company-specific risk be diversified away by investing in both Lithium Australia and Winsome 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 Winsome 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 Winsome Resources Limited, you can compare the effects of market volatilities on Lithium Australia and Winsome 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 Winsome Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Winsome Resources.
Diversification Opportunities for Lithium Australia and Winsome Resources
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithium and Winsome is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Winsome Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winsome 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 Winsome Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winsome Resources has no effect on the direction of Lithium Australia i.e., Lithium Australia and Winsome Resources go up and down completely randomly.
Pair Corralation between Lithium Australia and Winsome Resources
Assuming the 90 days horizon Lithium Australia NL is expected to generate 9.35 times more return on investment than Winsome Resources. However, Lithium Australia is 9.35 times more volatile than Winsome Resources Limited. It trades about 0.03 of its potential returns per unit of risk. Winsome Resources Limited is currently generating about 0.22 per unit of risk. If you would invest 1.00 in Lithium Australia NL on November 5, 2024 and sell it today you would earn a total of 0.00 from holding Lithium Australia NL or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Australia NL vs. Winsome Resources Limited
Performance |
| Timeline |
| Lithium Australia |
| Winsome Resources |
Lithium Australia and Winsome Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Australia and Winsome Resources
The main advantage of trading using opposite Lithium Australia and Winsome Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Australia position performs unexpectedly, Winsome 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 Winsome Resources will offset losses from the drop in Winsome 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 |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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