Correlation Between Foremost Lithium and SFL

Can any of the company-specific risk be diversified away by investing in both Foremost Lithium and SFL 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 SFL 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 SFL Corporation, you can compare the effects of market volatilities on Foremost Lithium and SFL 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 SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foremost Lithium and SFL.

Diversification Opportunities for Foremost Lithium and SFL

0.63

Correlation Coefficient

Foremost Lithium  SFL

Poor diversification

The 3 months correlation between Foremost and SFL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Foremost Lithium Resource and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of Foremost Lithium i.e., Foremost Lithium and SFL go up and down completely randomly.

Pair Corralation between Foremost Lithium and SFL

Assuming the 90 days horizon Foremost Lithium Resource is expected to under-perform the SFL. In addition to that, Foremost Lithium is 8.53 times more volatile than SFL Corporation. It trades about -0.05 of its total potential returns per unit of risk. SFL Corporation is currently generating about -0.13 per unit of volatility. If you would invest  968.00  in SFL Corporation on December 28, 2024 and sell it today you would lose (153.00) from holding SFL Corporation or give up 15.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.18%
Values	Daily Returns

Foremost Lithium Resource  vs.  SFL Corp.

Foremost Lithium Resource

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

SFL Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Foremost Lithium and SFL

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

The idea behind Foremost Lithium Resource and SFL Corporation 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.