Correlation Between Canada Rare and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both Canada Rare and Lithium Australia 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 Lithium Australia 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 Lithium Australia NL, you can compare the effects of market volatilities on Canada Rare and Lithium Australia 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 Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canada Rare and Lithium Australia.
Diversification Opportunities for Canada Rare and Lithium Australia
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canada and Lithium is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia 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 Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Canada Rare i.e., Canada Rare and Lithium Australia go up and down completely randomly.
Pair Corralation between Canada Rare and Lithium Australia
Assuming the 90 days horizon Canada Rare is expected to generate 1.25 times less return on investment than Lithium Australia. But when comparing it to its historical volatility, Canada Rare Earth is 2.25 times less risky than Lithium Australia. It trades about 0.14 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.80 in Lithium Australia NL on September 1, 2024 and sell it today you would lose (1.10) from holding Lithium Australia NL or give up 61.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canada Rare Earth vs. Lithium Australia NL
Performance |
| Timeline |
| Canada Rare Earth |
| Lithium Australia |
Canada Rare and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canada Rare and Lithium Australia
The main advantage of trading using opposite Canada Rare and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Rare position performs unexpectedly, Lithium Australia 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 Australia will offset losses from the drop in Lithium Australia'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 |
| Lithium Australia vs. ATT Inc | Lithium Australia vs. Merck Company | Lithium Australia vs. Walt Disney | Lithium Australia vs. Caterpillar |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |