Correlation Between Lithium Americas and Prime Mining

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

Diversification Opportunities for Lithium Americas and Prime Mining

0.15

Correlation Coefficient

Lithium Americas  Prime Mining

Average diversification

The 3 months correlation between Lithium and Prime is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Prime Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Mining 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 Prime Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Mining Corp has no effect on the direction of Lithium Americas i.e., Lithium Americas and Prime Mining go up and down completely randomly.

Pair Corralation between Lithium Americas and Prime Mining

Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the Prime Mining. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.07 times less risky than Prime Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Prime Mining Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Prime Mining Corp on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Prime Mining Corp or generate 3.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Lithium Americas Corp  vs.  Prime Mining Corp

Lithium Americas Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Lithium Americas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Prime Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lithium Americas and Prime Mining

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

The idea behind Lithium Americas Corp and Prime Mining 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.