Correlation Between Lithium Americas and Silver Bull
Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Silver Bull 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 Silver Bull 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 Silver Bull Resources, you can compare the effects of market volatilities on Lithium Americas and Silver Bull 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 Silver Bull. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Silver Bull.
Diversification Opportunities for Lithium Americas and Silver Bull
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lithium and Silver is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Silver Bull Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Bull Resources 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 Silver Bull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Bull Resources has no effect on the direction of Lithium Americas i.e., Lithium Americas and Silver Bull go up and down completely randomly.
Pair Corralation between Lithium Americas and Silver Bull
Assuming the 90 days trading horizon Lithium Americas Corp is expected to generate 1.25 times more return on investment than Silver Bull. However, Lithium Americas is 1.25 times more volatile than Silver Bull Resources. It trades about 0.09 of its potential returns per unit of risk. Silver Bull Resources is currently generating about -0.01 per unit of risk. If you would invest 370.00 in Lithium Americas Corp on October 14, 2024 and sell it today you would earn a total of 84.00 from holding Lithium Americas Corp or generate 22.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lithium Americas Corp vs. Silver Bull Resources
Performance |
Timeline |
Lithium Americas Corp |
Silver Bull Resources |
Lithium Americas and Silver Bull Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lithium Americas and Silver Bull
The main advantage of trading using opposite Lithium Americas and Silver Bull positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas position performs unexpectedly, Silver Bull 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 Silver Bull will offset losses from the drop in Silver Bull's long position.Lithium Americas vs. American Lithium Corp | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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