Correlation Between Teck Resources and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Lithium Americas 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 Teck Resources and Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Limited and Lithium Americas Corp, you can compare the effects of market volatilities on Teck Resources and Lithium Americas 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 Teck Resources with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Lithium Americas.
Diversification Opportunities for Teck Resources and Lithium Americas
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teck and Lithium is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Limited and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Teck Resources 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 Teck Resources Limited are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Teck Resources i.e., Teck Resources and Lithium Americas go up and down completely randomly.
Pair Corralation between Teck Resources and Lithium Americas
Assuming the 90 days trading horizon Teck Resources Limited is expected to generate 0.53 times more return on investment than Lithium Americas. However, Teck Resources Limited is 1.9 times less risky than Lithium Americas. It trades about -0.03 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.12 per unit of risk. If you would invest 6,632 in Teck Resources Limited on August 29, 2024 and sell it today you would lose (119.00) from holding Teck Resources Limited or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Limited vs. Lithium Americas Corp
Performance |
| Timeline |
| Teck Resources |
| Lithium Americas Corp |
Teck Resources and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Lithium Americas
The main advantage of trading using opposite Teck Resources and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Lithium Americas 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 Americas will offset losses from the drop in Lithium Americas' long position.| Teck Resources vs. First Quantum Minerals | Teck Resources vs. Nutrien | Teck Resources vs. Lundin Mining | Teck Resources vs. Wheaton Precious Metals |
| Lithium Americas vs. Teck Resources Limited | Lithium Americas vs. Ivanhoe Mines | Lithium Americas vs. Filo Mining Corp | Lithium Americas vs. Sigma Lithium 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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