Correlation Between Grid Metals and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both Grid Metals and Frontier Lithium 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 Grid Metals and Frontier Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grid Metals Corp and Frontier Lithium, you can compare the effects of market volatilities on Grid Metals and Frontier Lithium 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 Grid Metals with a short position of Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grid Metals and Frontier Lithium.
Diversification Opportunities for Grid Metals and Frontier Lithium
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Grid and Frontier is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Grid Metals Corp and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium and Grid Metals 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 Grid Metals Corp are associated (or correlated) with Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of Grid Metals i.e., Grid Metals and Frontier Lithium go up and down completely randomly.
Pair Corralation between Grid Metals and Frontier Lithium
Assuming the 90 days horizon Grid Metals Corp is expected to under-perform the Frontier Lithium. In addition to that, Grid Metals is 1.74 times more volatile than Frontier Lithium. It trades about -0.14 of its total potential returns per unit of risk. Frontier Lithium is currently generating about -0.07 per unit of volatility. If you would invest 41.00 in Frontier Lithium on September 1, 2024 and sell it today you would lose (4.00) from holding Frontier Lithium or give up 9.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Grid Metals Corp vs. Frontier Lithium
Performance |
| Timeline |
| Grid Metals Corp |
| Frontier Lithium |
Grid Metals and Frontier Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grid Metals and Frontier Lithium
The main advantage of trading using opposite Grid Metals and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grid Metals position performs unexpectedly, Frontier Lithium 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.The idea behind Grid Metals Corp and Frontier Lithium pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core Lithium |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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