Correlation Between Sayona Mining and Piedmont Lithium
Can any of the company-specific risk be diversified away by investing in both Sayona Mining and Piedmont 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 Sayona Mining and Piedmont Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sayona Mining Limited and Piedmont Lithium Ltd, you can compare the effects of market volatilities on Sayona Mining and Piedmont 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 Sayona Mining with a short position of Piedmont Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sayona Mining and Piedmont Lithium.
Diversification Opportunities for Sayona Mining and Piedmont Lithium
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sayona and Piedmont is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium and Sayona Mining 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 Sayona Mining Limited are associated (or correlated) with Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Sayona Mining i.e., Sayona Mining and Piedmont Lithium go up and down completely randomly.
Pair Corralation between Sayona Mining and Piedmont Lithium
Assuming the 90 days horizon Sayona Mining Limited is expected to under-perform the Piedmont Lithium. In addition to that, Sayona Mining is 1.27 times more volatile than Piedmont Lithium Ltd. It trades about -0.02 of its total potential returns per unit of risk. Piedmont Lithium Ltd is currently generating about 0.01 per unit of volatility. If you would invest 1,364 in Piedmont Lithium Ltd on August 27, 2024 and sell it today you would lose (45.00) from holding Piedmont Lithium Ltd or give up 3.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sayona Mining Limited vs. Piedmont Lithium Ltd
Performance |
| Timeline |
| Sayona Mining Limited |
| Piedmont Lithium |
Sayona Mining and Piedmont Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sayona Mining and Piedmont Lithium
The main advantage of trading using opposite Sayona Mining and Piedmont Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sayona Mining position performs unexpectedly, Piedmont 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 Piedmont Lithium will offset losses from the drop in Piedmont Lithium's long position.The idea behind Sayona Mining Limited and Piedmont Lithium Ltd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA ADR |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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