Correlation Between Foremost Lithium and Transportadora

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

Diversification Opportunities for Foremost Lithium and Transportadora

0.5

Correlation Coefficient

Foremost Lithium  Transportadora

Very weak diversification

The 3 months correlation between Foremost and Transportadora is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Foremost Lithium Resource and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Foremost Lithium i.e., Foremost Lithium and Transportadora go up and down completely randomly.

Pair Corralation between Foremost Lithium and Transportadora

Assuming the 90 days horizon Foremost Lithium Resource is expected to under-perform the Transportadora. In addition to that, Foremost Lithium is 5.24 times more volatile than Transportadora de Gas. It trades about -0.06 of its total potential returns per unit of risk. Transportadora de Gas is currently generating about -0.06 per unit of volatility. If you would invest  2,938  in Transportadora de Gas on December 2, 2024 and sell it today you would lose (397.00) from holding Transportadora de Gas or give up 13.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.9%
Values	Daily Returns

Foremost Lithium Resource  vs.  Transportadora de Gas

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 weak 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.

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Foremost Lithium and Transportadora

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

The idea behind Foremost Lithium Resource and Transportadora de Gas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.