Correlation Between LithiumBank Resources and Lotus Resources

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

Diversification Opportunities for LithiumBank Resources and Lotus Resources

0.31

Correlation Coefficient

LithiumBank Resources  Lotus Resources

Weak diversification

The 3 months correlation between LithiumBank and Lotus is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LithiumBank Resources Corp and Lotus Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Resources 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 Lotus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Resources has no effect on the direction of LithiumBank Resources i.e., LithiumBank Resources and Lotus Resources go up and down completely randomly.

Pair Corralation between LithiumBank Resources and Lotus Resources

Assuming the 90 days horizon LithiumBank Resources Corp is expected to under-perform the Lotus Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, LithiumBank Resources Corp is 1.35 times less risky than Lotus Resources. The otc stock trades about -0.16 of its potential returns per unit of risk. The Lotus Resources Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Lotus Resources Limited on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Lotus Resources Limited or generate 6.67% return on investment over 90 days.

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

LithiumBank Resources Corp  vs.  Lotus Resources Limited

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.

Lotus Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lotus Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LithiumBank Resources and Lotus Resources

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

The idea behind LithiumBank Resources Corp and Lotus Resources Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.