Correlation Between Frontier Lithium and LithiumBank Resources

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

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

Diversification Opportunities for Frontier Lithium and LithiumBank Resources

0.42

Correlation Coefficient

Frontier Lithium  LithiumBank Resources

Very weak diversification

The 3 months correlation between Frontier and LithiumBank is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources and Frontier 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 Frontier Lithium are associated (or correlated) with LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and LithiumBank Resources go up and down completely randomly.

Pair Corralation between Frontier Lithium and LithiumBank Resources

Given the investment horizon of 90 days Frontier Lithium is expected to generate 0.67 times more return on investment than LithiumBank Resources. However, Frontier Lithium is 1.49 times less risky than LithiumBank Resources. It trades about 0.09 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about 0.02 per unit of risk. If you would invest  53.00  in Frontier Lithium on December 1, 2024 and sell it today you would earn a total of  10.00  from holding Frontier Lithium or generate 18.87% return on investment over 90 days.

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

Frontier Lithium  vs.  LithiumBank Resources Corp

Frontier Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Lithium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Frontier Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

LithiumBank Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LithiumBank Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LithiumBank Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Frontier Lithium and LithiumBank Resources

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

The idea behind Frontier Lithium and LithiumBank Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.