Correlation Between Arizona Lithium and Golden Goliath

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

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

Diversification Opportunities for Arizona Lithium and Golden Goliath

0.15

Correlation Coefficient

Arizona Lithium  Golden Goliath

Average diversification

The 3 months correlation between Arizona and Golden is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Lithium Limited and Golden Goliath Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Goliath Resources and Arizona Lithium 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 Arizona Lithium Limited are associated (or correlated) with Golden Goliath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Goliath Resources has no effect on the direction of Arizona Lithium i.e., Arizona Lithium and Golden Goliath go up and down completely randomly.

Pair Corralation between Arizona Lithium and Golden Goliath

Assuming the 90 days horizon Arizona Lithium Limited is expected to generate 1.77 times more return on investment than Golden Goliath. However, Arizona Lithium is 1.77 times more volatile than Golden Goliath Resources. It trades about 0.13 of its potential returns per unit of risk. Golden Goliath Resources is currently generating about 0.15 per unit of risk. If you would invest  1.02  in Arizona Lithium Limited on December 29, 2024 and sell it today you would lose (0.57) from holding Arizona Lithium Limited or give up 55.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Arizona Lithium Limited  vs.  Golden Goliath Resources

Arizona Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Lithium Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arizona Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Golden Goliath Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Goliath Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Golden Goliath reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Lithium and Golden Goliath

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

The idea behind Arizona Lithium Limited and Golden Goliath Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.