Correlation Between Ferroglobe PLC and Atlas Lithium

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

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

Diversification Opportunities for Ferroglobe PLC and Atlas Lithium

0.48

Correlation Coefficient

Ferroglobe PLC  Atlas Lithium

Very weak diversification

The 3 months correlation between Ferroglobe and Atlas is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ferroglobe PLC and Atlas Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Lithium and Ferroglobe PLC 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 Ferroglobe PLC are associated (or correlated) with Atlas Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Lithium has no effect on the direction of Ferroglobe PLC i.e., Ferroglobe PLC and Atlas Lithium go up and down completely randomly.

Pair Corralation between Ferroglobe PLC and Atlas Lithium

Considering the 90-day investment horizon Ferroglobe PLC is expected to generate 0.71 times more return on investment than Atlas Lithium. However, Ferroglobe PLC is 1.41 times less risky than Atlas Lithium. It trades about -0.01 of its potential returns per unit of risk. Atlas Lithium is currently generating about -0.06 per unit of risk. If you would invest  377.00  in Ferroglobe PLC on December 29, 2024 and sell it today you would lose (13.00) from holding Ferroglobe PLC or give up 3.45% of portfolio value over 90 days.

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

Ferroglobe PLC  vs.  Atlas Lithium

Ferroglobe PLC

Risk-Adjusted Performance

Very Weak

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

Atlas Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atlas Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ferroglobe PLC and Atlas Lithium

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

The idea behind Ferroglobe PLC and Atlas Lithium 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.