Correlation Between Forstrong Global and Lithium Americas

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

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

Diversification Opportunities for Forstrong Global and Lithium Americas

-0.05

Correlation Coefficient

Forstrong Global  Lithium Americas

Good diversification

The 3 months correlation between Forstrong and Lithium is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Forstrong Global 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 Forstrong Global Income are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Forstrong Global i.e., Forstrong Global and Lithium Americas go up and down completely randomly.

Pair Corralation between Forstrong Global and Lithium Americas

Assuming the 90 days trading horizon Forstrong Global Income is expected to generate 0.11 times more return on investment than Lithium Americas. However, Forstrong Global Income is 9.26 times less risky than Lithium Americas. It trades about -0.22 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.11 per unit of risk. If you would invest  2,191  in Forstrong Global Income on October 6, 2024 and sell it today you would lose (32.00) from holding Forstrong Global Income or give up 1.46% of portfolio value over 90 days.

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

Forstrong Global Income  vs.  Lithium Americas Corp

Forstrong Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forstrong Global Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lithium Americas Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forstrong Global and Lithium Americas

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

The idea behind Forstrong Global Income and Lithium Americas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.