Correlation Between EMX Royalty and Standard Lithium

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

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

Diversification Opportunities for EMX Royalty and Standard Lithium

-0.39

Correlation Coefficient

EMX Royalty  Standard Lithium

Very good diversification

The 3 months correlation between EMX and Standard is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding EMX Royalty Corp and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and EMX Royalty 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 EMX Royalty Corp are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of EMX Royalty i.e., EMX Royalty and Standard Lithium go up and down completely randomly.

Pair Corralation between EMX Royalty and Standard Lithium

Considering the 90-day investment horizon EMX Royalty Corp is expected to generate 0.45 times more return on investment than Standard Lithium. However, EMX Royalty Corp is 2.24 times less risky than Standard Lithium. It trades about 0.17 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.01 per unit of risk. If you would invest  174.00  in EMX Royalty Corp on December 27, 2024 and sell it today you would earn a total of  33.00  from holding EMX Royalty Corp or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EMX Royalty Corp  vs.  Standard Lithium

EMX Royalty Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMX Royalty Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, EMX Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Standard Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Standard Lithium is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with EMX Royalty and Standard Lithium

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

The idea behind EMX Royalty Corp and Standard Lithium 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.