Correlation Between Foremost Lithium and DHI

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

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

Diversification Opportunities for Foremost Lithium and DHI

-0.29

Correlation Coefficient

Foremost Lithium  DHI

Very good diversification

The 3 months correlation between Foremost and DHI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Foremost Lithium Resource and DHI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHI Group and Foremost 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 Foremost Lithium Resource are associated (or correlated) with DHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHI Group has no effect on the direction of Foremost Lithium i.e., Foremost Lithium and DHI go up and down completely randomly.

Pair Corralation between Foremost Lithium and DHI

Given the investment horizon of 90 days Foremost Lithium Resource is expected to generate 3.15 times more return on investment than DHI. However, Foremost Lithium is 3.15 times more volatile than DHI Group. It trades about 0.14 of its potential returns per unit of risk. DHI Group is currently generating about 0.32 per unit of risk. If you would invest  119.00  in Foremost Lithium Resource on October 24, 2024 and sell it today you would earn a total of  26.00  from holding Foremost Lithium Resource or generate 21.85% return on investment over 90 days.

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

Foremost Lithium Resource  vs.  DHI Group

Foremost Lithium Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic 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.

DHI Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, DHI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foremost Lithium and DHI

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

The idea behind Foremost Lithium Resource and DHI Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.