Correlation Between Lithium Chile and Posera

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

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

Diversification Opportunities for Lithium Chile and Posera

-0.19

Correlation Coefficient

Lithium Chile  Posera

Good diversification

The 3 months correlation between Lithium and Posera is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Chile and Posera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posera and Lithium Chile 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 Chile are associated (or correlated) with Posera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posera has no effect on the direction of Lithium Chile i.e., Lithium Chile and Posera go up and down completely randomly.

Pair Corralation between Lithium Chile and Posera

Assuming the 90 days horizon Lithium Chile is expected to generate 0.9 times more return on investment than Posera. However, Lithium Chile is 1.11 times less risky than Posera. It trades about -0.07 of its potential returns per unit of risk. Posera is currently generating about -0.18 per unit of risk. If you would invest  52.00  in Lithium Chile on October 27, 2024 and sell it today you would lose (3.00) from holding Lithium Chile or give up 5.77% of portfolio value over 90 days.

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

Lithium Chile  vs.  Posera

Lithium Chile

Risk-Adjusted Performance

2 of 100

Weak

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

Posera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Posera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with Lithium Chile and Posera

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

The idea behind Lithium Chile and Posera 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.