Correlation Between Lithium Americas and Element Fleet

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

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

Diversification Opportunities for Lithium Americas and Element Fleet

0.2

Correlation Coefficient

Lithium Americas  Element Fleet

Modest diversification

The 3 months correlation between Lithium and Element is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Element Fleet Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Fleet Management and Lithium Americas 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 Lithium Americas Corp are associated (or correlated) with Element Fleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Fleet Management has no effect on the direction of Lithium Americas i.e., Lithium Americas and Element Fleet go up and down completely randomly.

Pair Corralation between Lithium Americas and Element Fleet

Assuming the 90 days trading horizon Lithium Americas Corp is expected to generate 4.31 times more return on investment than Element Fleet. However, Lithium Americas is 4.31 times more volatile than Element Fleet Management. It trades about -0.04 of its potential returns per unit of risk. Element Fleet Management is currently generating about -0.24 per unit of risk. If you would invest  458.00  in Lithium Americas Corp on October 10, 2024 and sell it today you would lose (18.00) from holding Lithium Americas Corp or give up 3.93% of portfolio value over 90 days.

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

Lithium Americas Corp  vs.  Element Fleet Management

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Element Fleet Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lithium Americas and Element Fleet

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

The idea behind Lithium Americas Corp and Element Fleet Management 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..