Correlation Between Argosy Minerals and Lithium Energi

Can any of the company-specific risk be diversified away by investing in both Argosy Minerals and Lithium Energi 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 Argosy Minerals and Lithium Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Argosy Minerals Limited and Lithium Energi Exploration, you can compare the effects of market volatilities on Argosy Minerals and Lithium Energi 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 Argosy Minerals with a short position of Lithium Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argosy Minerals and Lithium Energi.

Diversification Opportunities for Argosy Minerals and Lithium Energi

0.28

Correlation Coefficient

Argosy Minerals  Lithium Energi

Modest diversification

The 3 months correlation between Argosy and Lithium is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Argosy Minerals Limited and Lithium Energi Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Energi Explo and Argosy Minerals 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 Argosy Minerals Limited are associated (or correlated) with Lithium Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Energi Explo has no effect on the direction of Argosy Minerals i.e., Argosy Minerals and Lithium Energi go up and down completely randomly.

Pair Corralation between Argosy Minerals and Lithium Energi

Assuming the 90 days horizon Argosy Minerals is expected to generate 5.77 times less return on investment than Lithium Energi. But when comparing it to its historical volatility, Argosy Minerals Limited is 2.07 times less risky than Lithium Energi. It trades about 0.02 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.48  in Lithium Energi Exploration on December 29, 2024 and sell it today you would lose (0.95) from holding Lithium Energi Exploration or give up 38.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Argosy Minerals Limited  vs.  Lithium Energi Exploration

Argosy Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Argosy Minerals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Argosy Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Lithium Energi Explo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lithium Energi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argosy Minerals and Lithium Energi

The main advantage of trading using opposite Argosy Minerals and Lithium Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argosy Minerals position performs unexpectedly, Lithium Energi 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 Energi will offset losses from the drop in Lithium Energi's long position.

The idea behind Argosy Minerals Limited and Lithium Energi Exploration 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.