Correlation Between Solar Alliance and Lithium South
Can any of the company-specific risk be diversified away by investing in both Solar Alliance and Lithium South 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 Solar Alliance and Lithium South into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Alliance Energy and Lithium South Development, you can compare the effects of market volatilities on Solar Alliance and Lithium South 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 Solar Alliance with a short position of Lithium South. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and Lithium South.
Diversification Opportunities for Solar Alliance and Lithium South
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solar and Lithium is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Lithium South Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium South Development and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Lithium South. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium South Development has no effect on the direction of Solar Alliance i.e., Solar Alliance and Lithium South go up and down completely randomly.
Pair Corralation between Solar Alliance and Lithium South
Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 1.51 times more return on investment than Lithium South. However, Solar Alliance is 1.51 times more volatile than Lithium South Development. It trades about 0.04 of its potential returns per unit of risk. Lithium South Development is currently generating about -0.04 per unit of risk. If you would invest 4.00 in Solar Alliance Energy on September 2, 2024 and sell it today you would lose (0.50) from holding Solar Alliance Energy or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Alliance Energy vs. Lithium South Development
Performance |
| Timeline |
| Solar Alliance Energy |
| Lithium South Development |
Solar Alliance and Lithium South Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Alliance and Lithium South
The main advantage of trading using opposite Solar Alliance and Lithium South positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Alliance position performs unexpectedly, Lithium South 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 Lithium South will offset losses from the drop in Lithium South's long position.| Solar Alliance vs. Royal Bank of | Solar Alliance vs. Toronto Dominion Bank Pref | Solar Alliance vs. Toronto Dominion Bank | Solar Alliance vs. Amazon CDR |
| Lithium South vs. Lithium Chile | Lithium South vs. Frontier Lithium | Lithium South vs. Argentina Lithium Energy | Lithium South vs. Critical Elements |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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