Correlation Between Mount Gibson and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Mount Gibson and Lithium Australia 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 Mount Gibson and Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and Lithium Australia NL, you can compare the effects of market volatilities on Mount Gibson and Lithium Australia 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 Mount Gibson with a short position of Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Lithium Australia.
Diversification Opportunities for Mount Gibson and Lithium Australia
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mount and Lithium is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Mount Gibson i.e., Mount Gibson and Lithium Australia go up and down completely randomly.
Pair Corralation between Mount Gibson and Lithium Australia
Assuming the 90 days trading horizon Mount Gibson Iron is expected to generate 0.62 times more return on investment than Lithium Australia. However, Mount Gibson Iron is 1.62 times less risky than Lithium Australia. It trades about -0.02 of its potential returns per unit of risk. Lithium Australia NL is currently generating about -0.02 per unit of risk. If you would invest 54.00 in Mount Gibson Iron on September 4, 2024 and sell it today you would lose (22.00) from holding Mount Gibson Iron or give up 40.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. Lithium Australia NL
Performance |
| Timeline |
| Mount Gibson Iron |
| Lithium Australia |
Mount Gibson and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and Lithium Australia
The main advantage of trading using opposite Mount Gibson and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson position performs unexpectedly, Lithium Australia 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 Australia will offset losses from the drop in Lithium Australia's long position.| Mount Gibson vs. Northern Star Resources | Mount Gibson vs. Evolution Mining | Mount Gibson vs. Bluescope Steel | Mount Gibson vs. Sandfire Resources NL |
| Lithium Australia vs. Advanced Braking Technology | Lithium Australia vs. Genetic Technologies | Lithium Australia vs. Thorney Technologies | Lithium Australia vs. Energy Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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