Correlation Between Lithium Ionic and Fathom Nickel

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

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

Diversification Opportunities for Lithium Ionic and Fathom Nickel

-0.06

Correlation Coefficient

Lithium Ionic  Fathom Nickel

Good diversification

The 3 months correlation between Lithium and Fathom is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Ionic Corp and Fathom Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fathom Nickel and Lithium Ionic 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 Lithium Ionic Corp are associated (or correlated) with Fathom Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fathom Nickel has no effect on the direction of Lithium Ionic i.e., Lithium Ionic and Fathom Nickel go up and down completely randomly.

Pair Corralation between Lithium Ionic and Fathom Nickel

Assuming the 90 days horizon Lithium Ionic is expected to generate 1.42 times less return on investment than Fathom Nickel. But when comparing it to its historical volatility, Lithium Ionic Corp is 1.77 times less risky than Fathom Nickel. It trades about 0.03 of its potential returns per unit of risk. Fathom Nickel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.20  in Fathom Nickel on December 1, 2024 and sell it today you would lose (0.10) from holding Fathom Nickel or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Lithium Ionic Corp  vs.  Fathom Nickel

Lithium Ionic Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Ionic Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Lithium Ionic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fathom Nickel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fathom Nickel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Fathom Nickel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lithium Ionic and Fathom Nickel

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

The idea behind Lithium Ionic Corp and Fathom Nickel 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.