Correlation Between Lithium Americas and Guru Organic

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

Diversification Opportunities for Lithium Americas and Guru Organic

0.63
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Lithium Americas and Guru Organic

Assuming the 90 days trading horizon Lithium Americas Corp is expected to generate 0.88 times more return on investment than Guru Organic. However, Lithium Americas Corp is 1.14 times less risky than Guru Organic. It trades about -0.07 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.38 per unit of risk. If you would invest  441.00  in Lithium Americas Corp on October 7, 2024 and sell it today you would lose (26.00) from holding Lithium Americas Corp or give up 5.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lithium Americas Corp  vs.  Guru Organic Energy

 Performance 
       Timeline  
Lithium Americas Corp 

Risk-Adjusted Performance

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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 latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Guru Organic Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Guru Organic Energy 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lithium Americas and Guru Organic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lithium Americas and Guru Organic

The main advantage of trading using opposite Lithium Americas and Guru Organic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Guru Organic 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 Guru Organic will offset losses from the drop in Guru Organic's long position.
The idea behind Lithium Americas Corp and Guru Organic Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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