Correlation Between Gratomic and Lithium Australia

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

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

Diversification Opportunities for Gratomic and Lithium Australia

0.74

Correlation Coefficient

Gratomic  Lithium Australia

Poor diversification

The 3 months correlation between Gratomic and Lithium is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gratomic and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Gratomic 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 Gratomic are associated (or correlated) with Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Gratomic i.e., Gratomic and Lithium Australia go up and down completely randomly.

Pair Corralation between Gratomic and Lithium Australia

Assuming the 90 days horizon Gratomic is expected to generate 1.03 times more return on investment than Lithium Australia. However, Gratomic is 1.03 times more volatile than Lithium Australia NL. It trades about -0.06 of its potential returns per unit of risk. Lithium Australia NL is currently generating about -0.08 per unit of risk. If you would invest  4.13  in Gratomic on December 30, 2024 and sell it today you would lose (1.53) from holding Gratomic or give up 37.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Gratomic  vs.  Lithium Australia NL

Gratomic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gratomic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lithium Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Australia NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gratomic and Lithium Australia

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

The idea behind Gratomic and Lithium Australia NL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.