Correlation Between US GoldMining and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both US GoldMining and Standard 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 US GoldMining and Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US GoldMining Warrant and Standard Lithium, you can compare the effects of market volatilities on US GoldMining and Standard 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 US GoldMining with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of US GoldMining and Standard Lithium.
Diversification Opportunities for US GoldMining and Standard Lithium
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USGOW and Standard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding US GoldMining Warrant and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and US GoldMining 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 US GoldMining Warrant are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of US GoldMining i.e., US GoldMining and Standard Lithium go up and down completely randomly.
Pair Corralation between US GoldMining and Standard Lithium
Assuming the 90 days horizon US GoldMining Warrant is expected to generate 3.72 times more return on investment than Standard Lithium. However, US GoldMining is 3.72 times more volatile than Standard Lithium. It trades about 0.17 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.18 per unit of risk. If you would invest 120.00 in US GoldMining Warrant on August 25, 2024 and sell it today you would earn a total of 60.00 from holding US GoldMining Warrant or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US GoldMining Warrant vs. Standard Lithium
Performance |
| Timeline |
| US GoldMining Warrant |
| Standard Lithium |
US GoldMining and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US GoldMining and Standard Lithium
The main advantage of trading using opposite US GoldMining and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US GoldMining position performs unexpectedly, Standard 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| US GoldMining vs. Vale SA ADR | US GoldMining vs. Teck Resources Ltd | US GoldMining vs. MP Materials Corp | US GoldMining vs. BHP Group Limited |
| Standard Lithium vs. Lithium Americas Corp | Standard Lithium vs. Piedmont Lithium Ltd | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Teck Resources 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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