Correlation Between Delta Lithium and Iron Road

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

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

Diversification Opportunities for Delta Lithium and Iron Road

0.77

Correlation Coefficient

Delta Lithium  Iron Road

Poor diversification

The 3 months correlation between Delta and Iron is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Delta Lithium and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road and Delta 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 Delta Lithium are associated (or correlated) with Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Delta Lithium i.e., Delta Lithium and Iron Road go up and down completely randomly.

Pair Corralation between Delta Lithium and Iron Road

Assuming the 90 days trading horizon Delta Lithium is expected to generate 2.32 times more return on investment than Iron Road. However, Delta Lithium is 2.32 times more volatile than Iron Road. It trades about -0.04 of its potential returns per unit of risk. Iron Road is currently generating about -0.17 per unit of risk. If you would invest  19.00  in Delta Lithium on October 26, 2024 and sell it today you would lose (2.00) from holding Delta Lithium or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Delta Lithium  vs.  Iron Road

Delta Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Iron Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Delta Lithium and Iron Road

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

The idea behind Delta Lithium and Iron Road 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.