Correlation Between Focus Graphite and United Lithium

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

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

Diversification Opportunities for Focus Graphite and United Lithium

-0.34

Correlation Coefficient

Focus Graphite  United Lithium

Very good diversification

The 3 months correlation between Focus and United is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and United Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Lithium Corp and Focus Graphite 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 Focus Graphite are associated (or correlated) with United Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Lithium Corp has no effect on the direction of Focus Graphite i.e., Focus Graphite and United Lithium go up and down completely randomly.

Pair Corralation between Focus Graphite and United Lithium

Assuming the 90 days horizon Focus Graphite is expected to generate 0.99 times more return on investment than United Lithium. However, Focus Graphite is 1.01 times less risky than United Lithium. It trades about 0.01 of its potential returns per unit of risk. United Lithium Corp is currently generating about -0.03 per unit of risk. If you would invest  6.00  in Focus Graphite on December 26, 2024 and sell it today you would lose (1.00) from holding Focus Graphite or give up 16.67% of portfolio value over 90 days.

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

Focus Graphite  vs.  United Lithium Corp

Focus Graphite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Focus Graphite is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Lithium Corp 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 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 Focus Graphite and United Lithium

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

The idea behind Focus Graphite and United Lithium Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.