Correlation Between Canada Rare and International Lithium
Can any of the company-specific risk be diversified away by investing in both Canada Rare and International 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 Canada Rare and International Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canada Rare Earth and International Lithium Corp, you can compare the effects of market volatilities on Canada Rare and International 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 Canada Rare with a short position of International Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Rare and International Lithium.
Diversification Opportunities for Canada Rare and International Lithium
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Canada and International is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and International Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Lithium and Canada Rare 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 Canada Rare Earth are associated (or correlated) with International Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Lithium has no effect on the direction of Canada Rare i.e., Canada Rare and International Lithium go up and down completely randomly.
Pair Corralation between Canada Rare and International Lithium
Assuming the 90 days horizon Canada Rare Earth is expected to generate 3.03 times more return on investment than International Lithium. However, Canada Rare is 3.03 times more volatile than International Lithium Corp. It trades about 0.08 of its potential returns per unit of risk. International Lithium Corp is currently generating about 0.04 per unit of risk. If you would invest 2.00 in Canada Rare Earth on August 28, 2024 and sell it today you would lose (1.00) from holding Canada Rare Earth or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canada Rare Earth vs. International Lithium Corp
Performance |
| Timeline |
| Canada Rare Earth |
| International Lithium |
Canada Rare and International Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canada Rare and International Lithium
The main advantage of trading using opposite Canada Rare and International Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Rare position performs unexpectedly, International 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 International Lithium will offset losses from the drop in International Lithium's long position.| Canada Rare vs. Commerce Resources Corp | Canada Rare vs. Medallion Resources | Canada Rare vs. Ucore Rare Metals | Canada Rare vs. Bravada Gold |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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