Correlation Between Power Metals and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Power Metals and Lithium Americas 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 Power Metals and Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Metals Corp and Lithium Americas Corp, you can compare the effects of market volatilities on Power Metals and Lithium Americas 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 Power Metals with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metals and Lithium Americas.
Diversification Opportunities for Power Metals and Lithium Americas
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and Lithium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Power Metals Corp and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Power 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 Power Metals Corp are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Power Metals i.e., Power Metals and Lithium Americas go up and down completely randomly.
Pair Corralation between Power Metals and Lithium Americas
Assuming the 90 days horizon Power Metals Corp is expected to generate 0.96 times more return on investment than Lithium Americas. However, Power Metals Corp is 1.04 times less risky than Lithium Americas. It trades about 0.05 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.01 per unit of risk. If you would invest 20.00 in Power Metals Corp on September 3, 2024 and sell it today you would earn a total of 7.00 from holding Power Metals Corp or generate 35.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Metals Corp vs. Lithium Americas Corp
Performance |
| Timeline |
| Power Metals Corp |
| Lithium Americas Corp |
Power Metals and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Metals and Lithium Americas
The main advantage of trading using opposite Power Metals and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metals position performs unexpectedly, Lithium Americas 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 Americas will offset losses from the drop in Lithium Americas' long position.| Power Metals vs. Qubec Nickel Corp | Power Metals vs. IGO Limited | Power Metals vs. Avarone Metals | Power Metals vs. Adriatic Metals PLC |
| Lithium Americas vs. Sigma Lithium Resources | Lithium Americas vs. Standard Lithium | Lithium Americas vs. Sayona Mining Limited | Lithium Americas vs. MP Materials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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