Correlation Between Lithium Americas and IShares Global

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

Diversification Opportunities for Lithium Americas and IShares Global

0.21

Correlation Coefficient

Lithium Americas  IShares Global

Modest diversification

The 3 months correlation between Lithium and IShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and iShares Global Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Clean 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Clean has no effect on the direction of Lithium Americas i.e., Lithium Americas and IShares Global go up and down completely randomly.

Pair Corralation between Lithium Americas and IShares Global

Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the IShares Global. In addition to that, Lithium Americas is 3.06 times more volatile than iShares Global Clean. It trades about -0.03 of its total potential returns per unit of risk. iShares Global Clean is currently generating about 0.02 per unit of volatility. If you would invest  1,143  in iShares Global Clean on December 30, 2024 and sell it today you would earn a total of  10.00  from holding iShares Global Clean or generate 0.87% return on investment over 90 days.

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

Lithium Americas Corp  vs.  iShares Global Clean

Lithium Americas Corp

Risk-Adjusted Performance

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 latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

iShares Global Clean

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Clean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Global 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 IShares Global

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

The idea behind Lithium Americas Corp and iShares Global Clean 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.