Correlation Between International Lithium and Lithium Corp

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

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

Diversification Opportunities for International Lithium and Lithium Corp

-0.18

Correlation Coefficient

International Lithium  Lithium Corp

Good diversification

The 3 months correlation between International and Lithium is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding International Lithium Corp and Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Corp and International 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 International Lithium Corp are associated (or correlated) with Lithium Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Corp has no effect on the direction of International Lithium i.e., International Lithium and Lithium Corp go up and down completely randomly.

Pair Corralation between International Lithium and Lithium Corp

Assuming the 90 days horizon International Lithium Corp is expected to generate 1.16 times more return on investment than Lithium Corp. However, International Lithium is 1.16 times more volatile than Lithium Corp. It trades about 0.05 of its potential returns per unit of risk. Lithium Corp is currently generating about 0.01 per unit of risk. If you would invest  1.10  in International Lithium Corp on October 26, 2024 and sell it today you would earn a total of  0.01  from holding International Lithium Corp or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

International Lithium Corp  vs.  Lithium Corp

International Lithium

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Lithium Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, International Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Lithium Corp

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with International Lithium and Lithium Corp

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

The idea behind International Lithium Corp and Lithium 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.