Correlation Between Standard Lithium and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and Algoma Steel 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 Standard Lithium and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Lithium and Algoma Steel Group, you can compare the effects of market volatilities on Standard Lithium and Algoma Steel 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 Standard Lithium with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Algoma Steel.
Diversification Opportunities for Standard Lithium and Algoma Steel
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Standard and Algoma is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group and Standard 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 Standard Lithium are associated (or correlated) with Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of Standard Lithium i.e., Standard Lithium and Algoma Steel go up and down completely randomly.
Pair Corralation between Standard Lithium and Algoma Steel
Assuming the 90 days horizon Standard Lithium is expected to generate 2.5 times more return on investment than Algoma Steel. However, Standard Lithium is 2.5 times more volatile than Algoma Steel Group. It trades about 0.02 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.06 per unit of risk. If you would invest 263.00 in Standard Lithium on September 4, 2024 and sell it today you would lose (22.00) from holding Standard Lithium or give up 8.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Lithium vs. Algoma Steel Group
Performance |
| Timeline |
| Standard Lithium |
| Algoma Steel Group |
Standard Lithium and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Algoma Steel
The main advantage of trading using opposite Standard Lithium and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, Algoma Steel 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 Algoma Steel will offset losses from the drop in Algoma Steel's long position.| Standard Lithium vs. Sigma Lithium Resources | Standard Lithium vs. American Lithium Corp | Standard Lithium vs. Rock Tech Lithium | Standard Lithium vs. Frontier Lithium |
| Algoma Steel vs. Friedman Industries | Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Reliance Steel Aluminum | Algoma Steel vs. Universal Stainless Alloy |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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