Correlation Between BAIYU Holdings and Foremost Lithium

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

By analyzing existing cross correlation between BAIYU Holdings and Foremost Lithium Resource, you can compare the effects of market volatilities on BAIYU Holdings and Foremost 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 BAIYU Holdings with a short position of Foremost Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAIYU Holdings and Foremost Lithium.

Diversification Opportunities for BAIYU Holdings and Foremost Lithium

0.61

Correlation Coefficient

BAIYU Holdings  Foremost Lithium

Poor diversification

The 3 months correlation between BAIYU and Foremost is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BAIYU Holdings and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource and BAIYU Holdings 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 BAIYU Holdings are associated (or correlated) with Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of BAIYU Holdings i.e., BAIYU Holdings and Foremost Lithium go up and down completely randomly.

Pair Corralation between BAIYU Holdings and Foremost Lithium

Considering the 90-day investment horizon BAIYU Holdings is expected to under-perform the Foremost Lithium. But the stock apears to be less risky and, when comparing its historical volatility, BAIYU Holdings is 4.61 times less risky than Foremost Lithium. The stock trades about -0.25 of its potential returns per unit of risk. The Foremost Lithium Resource is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Foremost Lithium Resource on August 30, 2024 and sell it today you would lose (8.00) from holding Foremost Lithium Resource or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	61.11%
Values	Daily Returns

BAIYU Holdings  vs.  Foremost Lithium Resource

BAIYU Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAIYU Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Foremost Lithium Resource

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Foremost Lithium Resource are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Foremost Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BAIYU Holdings and Foremost Lithium

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

The idea behind BAIYU Holdings and Foremost Lithium Resource 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.