Correlation Between Lithium Corp and First American
Can any of the company-specific risk be diversified away by investing in both Lithium Corp and First American 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 Corp and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Corp and First American Silver, you can compare the effects of market volatilities on Lithium Corp and First American 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 Corp with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Corp and First American.
Diversification Opportunities for Lithium Corp and First American
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lithium and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Corp and First American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Silver and Lithium Corp 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 Corp are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Silver has no effect on the direction of Lithium Corp i.e., Lithium Corp and First American go up and down completely randomly.
Pair Corralation between Lithium Corp and First American
Given the investment horizon of 90 days Lithium Corp is expected to generate 34.02 times less return on investment than First American. But when comparing it to its historical volatility, Lithium Corp is 5.98 times less risky than First American. It trades about 0.01 of its potential returns per unit of risk. First American Silver is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.02 in First American Silver on September 1, 2024 and sell it today you would lose (0.01) from holding First American Silver or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lithium Corp vs. First American Silver
Performance |
| Timeline |
| Lithium Corp |
| First American Silver |
Lithium Corp and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Corp and First American
The main advantage of trading using opposite Lithium Corp and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Corp position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Lithium Corp vs. Altura Mining Limited | Lithium Corp vs. Frontier Lithium | Lithium Corp vs. Savannah Resources Plc | Lithium Corp vs. Lithium Ionic Corp |
| First American vs. Australian Vanadium Limited | First American vs. International Lithium Corp | First American vs. Wealth Minerals | First American vs. Decade 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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