Correlation Between LithiumBank Resources and Focus Graphite

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

Diversification Opportunities for LithiumBank Resources and Focus Graphite

0.64

Correlation Coefficient

LithiumBank Resources  Focus Graphite

Poor diversification

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

Pair Corralation between LithiumBank Resources and Focus Graphite

Assuming the 90 days horizon LithiumBank Resources Corp is expected to under-perform the Focus Graphite. But the otc stock apears to be less risky and, when comparing its historical volatility, LithiumBank Resources Corp is 2.88 times less risky than Focus Graphite. The otc stock trades about -0.04 of its potential returns per unit of risk. The Focus Graphite is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Focus Graphite on September 28, 2024 and sell it today you would earn a total of  1.00  from holding Focus Graphite or generate 20.0% return on investment over 90 days.

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

LithiumBank Resources Corp  vs.  Focus Graphite

LithiumBank Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LithiumBank Resources 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 forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Focus Graphite

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LithiumBank Resources and Focus Graphite

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

The idea behind LithiumBank Resources Corp and Focus Graphite 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.