Correlation Between Frontier Lithium and Avarone Metals

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

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

Diversification Opportunities for Frontier Lithium and Avarone Metals

0.0

Correlation Coefficient

Frontier Lithium  Avarone Metals

Pay attention - limited upside

The 3 months correlation between Frontier and Avarone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and Avarone Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avarone Metals and Frontier Lithium 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 Frontier Lithium are associated (or correlated) with Avarone Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avarone Metals has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and Avarone Metals go up and down completely randomly.

Pair Corralation between Frontier Lithium and Avarone Metals

If you would invest  38.00  in Frontier Lithium on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Frontier Lithium or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Frontier Lithium  vs.  Avarone Metals

Frontier Lithium

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Lithium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Frontier Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Avarone Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avarone Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Avarone Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Frontier Lithium and Avarone Metals

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

The idea behind Frontier Lithium and Avarone Metals 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.