Correlation Between Lithium Americas and Global X

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

Diversification Opportunities for Lithium Americas and Global X

0.86

Correlation Coefficient

Lithium Americas  Global X

Very poor diversification

The 3 months correlation between Lithium and Global is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Global X Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Lithium 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Lithium has no effect on the direction of Lithium Americas i.e., Lithium Americas and Global X go up and down completely randomly.

Pair Corralation between Lithium Americas and Global X

Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the Global X. In addition to that, Lithium Americas is 2.74 times more volatile than Global X Lithium. It trades about -0.04 of its total potential returns per unit of risk. Global X Lithium is currently generating about -0.03 per unit of volatility. If you would invest  6,251  in Global X Lithium on November 19, 2024 and sell it today you would lose (2,017) from holding Global X Lithium or give up 32.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	69.96%
Values	Daily Returns

Lithium Americas Corp  vs.  Global X Lithium

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 conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Global X Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lithium Americas and Global X

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

The idea behind Lithium Americas Corp and Global X Lithium 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.