Correlation Between Standard Lithium and Foraco International
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and Foraco International 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 Foraco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Lithium and Foraco International SA, you can compare the effects of market volatilities on Standard Lithium and Foraco International 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 Foraco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Foraco International.
Diversification Opportunities for Standard Lithium and Foraco International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and Foraco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International 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 Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Standard Lithium i.e., Standard Lithium and Foraco International go up and down completely randomly.
Pair Corralation between Standard Lithium and Foraco International
Assuming the 90 days horizon Standard Lithium is expected to under-perform the Foraco International. In addition to that, Standard Lithium is 1.73 times more volatile than Foraco International SA. It trades about -0.12 of its total potential returns per unit of risk. Foraco International SA is currently generating about 0.1 per unit of volatility. If you would invest 222.00 in Foraco International SA on September 13, 2024 and sell it today you would earn a total of 12.00 from holding Foraco International SA or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Standard Lithium vs. Foraco International SA
Performance |
| Timeline |
| Standard Lithium |
| Foraco International |
Standard Lithium and Foraco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Foraco International
The main advantage of trading using opposite Standard Lithium and Foraco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, Foraco International 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 Foraco International will offset losses from the drop in Foraco International's long position.| Standard Lithium vs. Foraco International SA | Standard Lithium vs. Geodrill Limited | Standard Lithium vs. Major Drilling Group | Standard Lithium vs. Bri Chem Corp |
| Foraco International vs. Orbit Garant Drilling | Foraco International vs. Geodrill Limited | Foraco International vs. Mccoy Global | Foraco International vs. Bri Chem 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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