Correlation Between Lithium Corp and Decade Resources
Can any of the company-specific risk be diversified away by investing in both Lithium Corp and Decade 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 Corp and Decade Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Corp and Decade Resources, you can compare the effects of market volatilities on Lithium Corp and Decade 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 Corp with a short position of Decade Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Corp and Decade Resources.
Diversification Opportunities for Lithium Corp and Decade Resources
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithium and Decade is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Corp and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources 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 Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of Lithium Corp i.e., Lithium Corp and Decade Resources go up and down completely randomly.
Pair Corralation between Lithium Corp and Decade Resources
Given the investment horizon of 90 days Lithium Corp is expected to generate 69.86 times less return on investment than Decade Resources. But when comparing it to its historical volatility, Lithium Corp is 2.37 times less risky than Decade Resources. It trades about 0.0 of its potential returns per unit of risk. Decade Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6.99 in Decade Resources on September 3, 2024 and sell it today you would lose (3.89) from holding Decade Resources or give up 55.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Corp vs. Decade Resources
Performance |
| Timeline |
| Lithium Corp |
| Decade Resources |
Lithium Corp and Decade Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Corp and Decade Resources
The main advantage of trading using opposite Lithium Corp and Decade Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Corp position performs unexpectedly, Decade 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 Decade Resources will offset losses from the drop in Decade Resources' long position.| Lithium Corp vs. Qubec Nickel Corp | Lithium Corp vs. IGO Limited | Lithium Corp vs. Avarone Metals | Lithium Corp vs. Adriatic Metals PLC |
| Decade Resources vs. Qubec Nickel Corp | Decade Resources vs. IGO Limited | Decade Resources vs. Avarone Metals | Decade Resources vs. Adriatic Metals PLC |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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