Correlation Between Standard Lithium and Foremost Lithium
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and Foremost 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 Foremost 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 Foremost Lithium Resource, you can compare the effects of market volatilities on Standard Lithium and Foremost 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 Foremost Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Foremost Lithium.
Diversification Opportunities for Standard Lithium and Foremost Lithium
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Standard and Foremost is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource 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 Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Standard Lithium i.e., Standard Lithium and Foremost Lithium go up and down completely randomly.
Pair Corralation between Standard Lithium and Foremost Lithium
Considering the 90-day investment horizon Standard Lithium is expected to under-perform the Foremost Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Standard Lithium is 4.57 times less risky than Foremost Lithium. The stock trades about -0.01 of its potential returns per unit of risk. The Foremost Lithium Resource is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Foremost Lithium Resource on August 25, 2024 and sell it today you would lose (38.00) from holding Foremost Lithium Resource or give up 61.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 39.44% |
| Values | Daily Returns |
Standard Lithium vs. Foremost Lithium Resource
Performance |
| Timeline |
| Standard Lithium |
| Foremost Lithium Resource |
Standard Lithium and Foremost Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Foremost Lithium
The main advantage of trading using opposite Standard Lithium and Foremost Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, Foremost 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 Foremost Lithium will offset losses from the drop in Foremost Lithium's long position.| Standard Lithium vs. Lithium Americas Corp | Standard Lithium vs. Piedmont Lithium Ltd | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Teck Resources Ltd |
| Foremost Lithium vs. National Beverage Corp | Foremost Lithium vs. Diageo PLC ADR | Foremost Lithium vs. Thai Beverage PCL | Foremost Lithium vs. Keurig Dr Pepper |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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