Correlation Between Lithium Corp and Lithium Power
Can any of the company-specific risk be diversified away by investing in both Lithium Corp and Lithium Power 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 Lithium Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Corp and Lithium Power International, you can compare the effects of market volatilities on Lithium Corp and Lithium Power 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 Lithium Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Corp and Lithium Power.
Diversification Opportunities for Lithium Corp and Lithium Power
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lithium and Lithium is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Corp and Lithium Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Power Intern 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 Lithium Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Power Intern has no effect on the direction of Lithium Corp i.e., Lithium Corp and Lithium Power go up and down completely randomly.
Pair Corralation between Lithium Corp and Lithium Power
Given the investment horizon of 90 days Lithium Corp is expected to generate 1.29 times more return on investment than Lithium Power. However, Lithium Corp is 1.29 times more volatile than Lithium Power International. It trades about 0.01 of its potential returns per unit of risk. Lithium Power International is currently generating about -0.01 per unit of risk. If you would invest 10.00 in Lithium Corp on September 1, 2024 and sell it today you would lose (6.66) from holding Lithium Corp or give up 66.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 31.11% |
| Values | Daily Returns |
Lithium Corp vs. Lithium Power International
Performance |
| Timeline |
| Lithium Corp |
| Lithium Power Intern |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lithium Corp and Lithium Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Corp and Lithium Power
The main advantage of trading using opposite Lithium Corp and Lithium Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Corp position performs unexpectedly, Lithium Power 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 Lithium Power will offset losses from the drop in Lithium Power'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 |
| Lithium Power vs. Macmahon Holdings Limited | Lithium Power vs. Rokmaster Resources Corp | Lithium Power vs. Hudson Resources | Lithium Power vs. Thunder Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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