Correlation Between Lithium Americas and Osisko Development

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

Diversification Opportunities for Lithium Americas and Osisko Development

-0.51

Correlation Coefficient

Lithium Americas  Osisko Development

Excellent diversification

The 3 months correlation between Lithium and Osisko is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Osisko Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osisko Development Corp 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 Osisko Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osisko Development Corp has no effect on the direction of Lithium Americas i.e., Lithium Americas and Osisko Development go up and down completely randomly.

Pair Corralation between Lithium Americas and Osisko Development

Assuming the 90 days trading horizon Lithium Americas Corp is expected to under-perform the Osisko Development. In addition to that, Lithium Americas is 1.22 times more volatile than Osisko Development Corp. It trades about -0.07 of its total potential returns per unit of risk. Osisko Development Corp is currently generating about -0.03 per unit of volatility. If you would invest  614.00  in Osisko Development Corp on October 3, 2024 and sell it today you would lose (380.00) from holding Osisko Development Corp or give up 61.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.64%
Values	Daily Returns

Lithium Americas Corp  vs.  Osisko Development Corp

Lithium Americas Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

Osisko Development Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Osisko Development Corp 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 basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lithium Americas and Osisko Development

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

The idea behind Lithium Americas Corp and Osisko Development 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.