Correlation Between Standard Lithium and United Lithium
Can any of the company-specific risk be diversified away by investing in both Standard Lithium and United 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 United 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 United Lithium Corp, you can compare the effects of market volatilities on Standard Lithium and United 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 United Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and United Lithium.
Diversification Opportunities for Standard Lithium and United Lithium
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Standard and United is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and United Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Lithium Corp 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 United Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Lithium Corp has no effect on the direction of Standard Lithium i.e., Standard Lithium and United Lithium go up and down completely randomly.
Pair Corralation between Standard Lithium and United Lithium
Considering the 90-day investment horizon Standard Lithium is expected to under-perform the United Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Standard Lithium is 2.36 times less risky than United Lithium. The stock trades about -0.27 of its potential returns per unit of risk. The United Lithium Corp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 16.00 in United Lithium Corp on August 29, 2024 and sell it today you would lose (5.00) from holding United Lithium Corp or give up 31.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Lithium vs. United Lithium Corp
Performance |
| Timeline |
| Standard Lithium |
| United Lithium Corp |
Standard Lithium and United Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and United Lithium
The main advantage of trading using opposite Standard Lithium and United Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium position performs unexpectedly, United 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 United Lithium will offset losses from the drop in United Lithium's long position.| Standard Lithium vs. Vale SA ADR | Standard Lithium vs. BHP Group Limited | Standard Lithium vs. Glencore PLC ADR | Standard Lithium vs. Piedmont Lithium Ltd |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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