Correlation Between Lithium Power and Alpha Lithium

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

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

Diversification Opportunities for Lithium Power and Alpha Lithium

-0.17

Correlation Coefficient

Lithium Power  Alpha Lithium

Good diversification

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

Pair Corralation between Lithium Power and Alpha Lithium

Assuming the 90 days horizon Lithium Power International is expected to under-perform the Alpha Lithium. In addition to that, Lithium Power is 1.9 times more volatile than Alpha Lithium Corp. It trades about -0.02 of its total potential returns per unit of risk. Alpha Lithium Corp is currently generating about 0.06 per unit of volatility. If you would invest  88.00  in Alpha Lithium Corp on October 11, 2024 and sell it today you would earn a total of  19.00  from holding Alpha Lithium Corp or generate 21.59% return on investment over 90 days.

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

Lithium Power International  vs.  Alpha Lithium Corp

Lithium Power Intern

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alpha Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lithium Power and Alpha Lithium

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

The idea behind Lithium Power International and Alpha Lithium Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.