Correlation Between Standard Lithium and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and Frontier 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 Standard Lithium and Frontier Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Lithium and Frontier Lithium, you can compare the effects of market volatilities on Standard Lithium and Frontier 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 Standard Lithium with a short position of Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Frontier Lithium.
Diversification Opportunities for Standard Lithium and Frontier Lithium
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Standard and Frontier is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of Standard Lithium i.e., Standard Lithium and Frontier Lithium go up and down completely randomly.
Pair Corralation between Standard Lithium and Frontier Lithium
Assuming the 90 days horizon Standard Lithium is expected to under-perform the Frontier Lithium. In addition to that, Standard Lithium is 1.33 times more volatile than Frontier Lithium. It trades about -0.26 of its total potential returns per unit of risk. Frontier Lithium is currently generating about -0.13 per unit of volatility. If you would invest 60.00 in Frontier Lithium on August 28, 2024 and sell it today you would lose (7.00) from holding Frontier Lithium or give up 11.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Lithium vs. Frontier Lithium
Performance |
| Timeline |
| Standard Lithium |
| Frontier Lithium |
Standard Lithium and Frontier Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Frontier Lithium
The main advantage of trading using opposite Standard Lithium and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, Frontier 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.| Standard Lithium vs. First Majestic Silver | Standard Lithium vs. Ivanhoe Energy | Standard Lithium vs. Orezone Gold Corp | Standard Lithium vs. Faraday Copper Corp |
| Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Rock Tech Lithium | Frontier Lithium vs. American Lithium Corp | Frontier Lithium vs. American Manganese |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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