Correlation Between South Star and Global Li-Ion
Can any of the company-specific risk be diversified away by investing in both South Star and Global Li-Ion 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 South Star and Global Li-Ion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South Star Battery and Global Li Ion Graphite, you can compare the effects of market volatilities on South Star and Global Li-Ion 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 South Star with a short position of Global Li-Ion. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Star and Global Li-Ion.
Diversification Opportunities for South Star and Global Li-Ion
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between South and Global is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding South Star Battery and Global Li Ion Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Li Ion and South Star 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 South Star Battery are associated (or correlated) with Global Li-Ion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Li Ion has no effect on the direction of South Star i.e., South Star and Global Li-Ion go up and down completely randomly.
Pair Corralation between South Star and Global Li-Ion
Assuming the 90 days horizon South Star is expected to generate 5.66 times less return on investment than Global Li-Ion. But when comparing it to its historical volatility, South Star Battery is 2.93 times less risky than Global Li-Ion. It trades about 0.03 of its potential returns per unit of risk. Global Li Ion Graphite is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4.30 in Global Li Ion Graphite on August 25, 2024 and sell it today you would lose (3.26) from holding Global Li Ion Graphite or give up 75.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.15% |
| Values | Daily Returns |
South Star Battery vs. Global Li Ion Graphite
Performance |
| Timeline |
| South Star Battery |
| Global Li Ion |
South Star and Global Li-Ion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South Star and Global Li-Ion
The main advantage of trading using opposite South Star and Global Li-Ion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Star position performs unexpectedly, Global Li-Ion 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 Global Li-Ion will offset losses from the drop in Global Li-Ion's long position.| South Star vs. Norra Metals Corp | South Star vs. ZincX Resources Corp | South Star vs. Nuinsco Resources Limited | South Star vs. Mundoro Capital |
| Global Li-Ion vs. Norra Metals Corp | Global Li-Ion vs. ZincX Resources Corp | Global Li-Ion vs. Nuinsco Resources Limited | Global Li-Ion vs. South Star Battery |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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