Correlation Between Standard Lithium and Red Moon
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and Red Moon 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 Red Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Lithium and Red Moon Resources, you can compare the effects of market volatilities on Standard Lithium and Red Moon 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 Red Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Red Moon.
Diversification Opportunities for Standard Lithium and Red Moon
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Standard and Red is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Standard Lithium i.e., Standard Lithium and Red Moon go up and down completely randomly.
Pair Corralation between Standard Lithium and Red Moon
Considering the 90-day investment horizon Standard Lithium is expected to under-perform the Red Moon. But the stock apears to be less risky and, when comparing its historical volatility, Standard Lithium is 1.08 times less risky than Red Moon. The stock trades about -0.24 of its potential returns per unit of risk. The Red Moon Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Red Moon Resources on December 1, 2024 and sell it today you would earn a total of 0.00 from holding Red Moon Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Lithium vs. Red Moon Resources
Performance |
| Timeline |
| Standard Lithium |
| Red Moon Resources |
Standard Lithium and Red Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Red Moon
The main advantage of trading using opposite Standard Lithium and Red Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, Red Moon 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 Red Moon will offset losses from the drop in Red Moon'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 |
| Red Moon vs. Aurwest Resources | Red Moon vs. Benton Resources | Red Moon vs. Pan Global Resources | Red Moon vs. Tower Resources |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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