Correlation Between Frontier Lithium and Jindalee Resources

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

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

Diversification Opportunities for Frontier Lithium and Jindalee Resources

0.17

Correlation Coefficient

Frontier Lithium  Jindalee Resources

Average diversification

The 3 months correlation between Frontier and Jindalee is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and Jindalee Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindalee Resources 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 Jindalee Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindalee Resources has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and Jindalee Resources go up and down completely randomly.

Pair Corralation between Frontier Lithium and Jindalee Resources

Assuming the 90 days horizon Frontier Lithium is expected to under-perform the Jindalee Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, Frontier Lithium is 2.71 times less risky than Jindalee Resources. The otc stock trades about -0.07 of its potential returns per unit of risk. The Jindalee Resources Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Jindalee Resources Limited on October 24, 2024 and sell it today you would lose (5.00) from holding Jindalee Resources Limited or give up 26.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Frontier Lithium  vs.  Jindalee Resources Limited

Frontier Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Lithium 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Jindalee Resources

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jindalee Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Jindalee Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontier Lithium and Jindalee Resources

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

The idea behind Frontier Lithium and Jindalee 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.