Correlation Between LithiumBank Resources and E3 Lithium

Can any of the company-specific risk be diversified away by investing in both LithiumBank Resources and E3 Lithium 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 LithiumBank Resources and E3 Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LithiumBank Resources Corp and E3 Lithium, you can compare the effects of market volatilities on LithiumBank Resources and E3 Lithium 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 LithiumBank Resources with a short position of E3 Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of LithiumBank Resources and E3 Lithium.

Diversification Opportunities for LithiumBank Resources and E3 Lithium

-0.64

Correlation Coefficient

LithiumBank Resources  E3 Lithium

Excellent diversification

The 3 months correlation between LithiumBank and ETL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LithiumBank Resources Corp and E3 Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 Lithium and LithiumBank Resources 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 LithiumBank Resources Corp are associated (or correlated) with E3 Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Lithium has no effect on the direction of LithiumBank Resources i.e., LithiumBank Resources and E3 Lithium go up and down completely randomly.

Pair Corralation between LithiumBank Resources and E3 Lithium

Assuming the 90 days trading horizon LithiumBank Resources Corp is expected to generate 2.02 times more return on investment than E3 Lithium. However, LithiumBank Resources is 2.02 times more volatile than E3 Lithium. It trades about 0.1 of its potential returns per unit of risk. E3 Lithium is currently generating about -0.07 per unit of risk. If you would invest  26.00  in LithiumBank Resources Corp on December 30, 2024 and sell it today you would earn a total of  9.00  from holding LithiumBank Resources Corp or generate 34.62% return on investment over 90 days.

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

LithiumBank Resources Corp  vs.  E3 Lithium

LithiumBank Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LithiumBank Resources Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, LithiumBank Resources showed solid returns over the last few months and may actually be approaching a breakup point.

E3 Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days E3 Lithium 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with LithiumBank Resources and E3 Lithium

The main advantage of trading using opposite LithiumBank Resources and E3 Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LithiumBank Resources position performs unexpectedly, E3 Lithium 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 E3 Lithium will offset losses from the drop in E3 Lithium's long position.

The idea behind LithiumBank Resources Corp and E3 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.