Correlation Between Lithium Corp and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Lithium Corp and Fortescue Metals 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 Fortescue Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Corp and Fortescue Metals Group, you can compare the effects of market volatilities on Lithium Corp and Fortescue Metals 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 Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Corp and Fortescue Metals.
Diversification Opportunities for Lithium Corp and Fortescue Metals
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lithium and Fortescue is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Corp and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Lithium Corp i.e., Lithium Corp and Fortescue Metals go up and down completely randomly.
Pair Corralation between Lithium Corp and Fortescue Metals
Given the investment horizon of 90 days Lithium Corp is expected to generate 2.02 times less return on investment than Fortescue Metals. In addition to that, Lithium Corp is 2.51 times more volatile than Fortescue Metals Group. It trades about 0.03 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.14 per unit of volatility. If you would invest 1,150 in Fortescue Metals Group on November 2, 2024 and sell it today you would earn a total of 80.00 from holding Fortescue Metals Group or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Corp vs. Fortescue Metals Group
Performance |
| Timeline |
| Lithium Corp |
| Fortescue Metals |
Lithium Corp and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Corp and Fortescue Metals
The main advantage of trading using opposite Lithium Corp and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Corp position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Lithium Corp vs. Hannan Metals | Lithium Corp vs. Atco Mining | Lithium Corp vs. Leading Edge Materials | Lithium Corp vs. Arianne Phosphate |
| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources Limited |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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