Correlation Between Piedmont Lithium and Westwater Resources
Can any of the company-specific risk be diversified away by investing in both Piedmont Lithium and Westwater 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 Westwater 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 Westwater Resources, you can compare the effects of market volatilities on Piedmont Lithium and Westwater 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 Westwater Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piedmont Lithium and Westwater Resources.
Diversification Opportunities for Piedmont Lithium and Westwater Resources
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Piedmont and Westwater is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium Ltd and Westwater Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwater 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 Westwater Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwater Resources has no effect on the direction of Piedmont Lithium i.e., Piedmont Lithium and Westwater Resources go up and down completely randomly.
Pair Corralation between Piedmont Lithium and Westwater Resources
Considering the 90-day investment horizon Piedmont Lithium is expected to generate 2.33 times less return on investment than Westwater Resources. But when comparing it to its historical volatility, Piedmont Lithium Ltd is 1.08 times less risky than Westwater Resources. It trades about 0.05 of its potential returns per unit of risk. Westwater Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 53.00 in Westwater Resources on November 2, 2024 and sell it today you would earn a total of 43.00 from holding Westwater Resources or generate 81.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.03% |
| Values | Daily Returns |
Piedmont Lithium Ltd vs. Westwater Resources
Performance |
| Timeline |
| Piedmont Lithium |
| Westwater Resources |
Piedmont Lithium and Westwater Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Piedmont Lithium and Westwater Resources
The main advantage of trading using opposite Piedmont Lithium and Westwater Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium position performs unexpectedly, Westwater 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 Westwater Resources will offset losses from the drop in Westwater 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 |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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