Correlation Between Lithium Americas and Troilus Gold

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

Diversification Opportunities for Lithium Americas and Troilus Gold

-0.46

Correlation Coefficient

Lithium Americas  Troilus Gold

Very good diversification

The 3 months correlation between Lithium and Troilus is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Troilus Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Troilus Gold 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 Troilus Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Troilus Gold Corp has no effect on the direction of Lithium Americas i.e., Lithium Americas and Troilus Gold go up and down completely randomly.

Pair Corralation between Lithium Americas and Troilus Gold

Assuming the 90 days trading horizon Lithium Americas Corp is expected to under-perform the Troilus Gold. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.13 times less risky than Troilus Gold. The stock trades about -0.47 of its potential returns per unit of risk. The Troilus Gold Corp is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Troilus Gold Corp on September 23, 2024 and sell it today you would lose (5.00) from holding Troilus Gold Corp or give up 14.71% of portfolio value over 90 days.

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

Lithium Americas Corp  vs.  Troilus Gold Corp

Lithium Americas Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

Troilus Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Troilus Gold 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lithium Americas and Troilus Gold

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

The idea behind Lithium Americas Corp and Troilus Gold 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.