Correlation Between LithiumBank Resources and Standard Lithium

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

Diversification Opportunities for LithiumBank Resources and Standard Lithium

-0.03

Correlation Coefficient

LithiumBank Resources  Standard Lithium

Good diversification

The 3 months correlation between LithiumBank and Standard is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding LithiumBank Resources Corp and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of LithiumBank Resources i.e., LithiumBank Resources and Standard Lithium go up and down completely randomly.

Pair Corralation between LithiumBank Resources and Standard Lithium

Assuming the 90 days trading horizon LithiumBank Resources Corp is expected to generate 1.52 times more return on investment than Standard Lithium. However, LithiumBank Resources is 1.52 times more volatile than Standard Lithium. It trades about 0.02 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.09 per unit of risk. If you would invest  28.00  in LithiumBank Resources Corp on December 1, 2024 and sell it today you would lose (1.00) from holding LithiumBank Resources Corp or give up 3.57% of portfolio value over 90 days.

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

LithiumBank Resources Corp  vs.  Standard Lithium

LithiumBank Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LithiumBank Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LithiumBank Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Standard Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard 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 Standard Lithium

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

The idea behind LithiumBank Resources Corp and Standard 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.