Correlation Between Piedmont Lithium and Teck Resources
Can any of the company-specific risk be diversified away by investing in both Piedmont Lithium and Teck 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 Piedmont Lithium and Teck Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Piedmont Lithium Ltd and Teck Resources Ltd, you can compare the effects of market volatilities on Piedmont Lithium and Teck 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 Piedmont Lithium with a short position of Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piedmont Lithium and Teck Resources.
Diversification Opportunities for Piedmont Lithium and Teck Resources
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Piedmont and Teck is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium Ltd and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources and Piedmont Lithium 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 Piedmont Lithium Ltd are associated (or correlated) with Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Piedmont Lithium i.e., Piedmont Lithium and Teck Resources go up and down completely randomly.
Pair Corralation between Piedmont Lithium and Teck Resources
Considering the 90-day investment horizon Piedmont Lithium Ltd is expected to under-perform the Teck Resources. In addition to that, Piedmont Lithium is 2.64 times more volatile than Teck Resources Ltd. It trades about -0.02 of its total potential returns per unit of risk. Teck Resources Ltd is currently generating about 0.06 per unit of volatility. If you would invest 3,615 in Teck Resources Ltd on August 24, 2024 and sell it today you would earn a total of 1,106 from holding Teck Resources Ltd or generate 30.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Piedmont Lithium Ltd vs. Teck Resources Ltd
Performance |
| Timeline |
| Piedmont Lithium |
| Teck Resources |
Piedmont Lithium and Teck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Piedmont Lithium and Teck Resources
The main advantage of trading using opposite Piedmont Lithium and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium position performs unexpectedly, Teck 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 Teck Resources will offset losses from the drop in Teck Resources' long position.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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