Correlation Between Lithium Chile and Ultra Resources

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

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

Diversification Opportunities for Lithium Chile and Ultra Resources

0.0

Correlation Coefficient

Lithium Chile  Ultra Resources

Pay attention - limited upside

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

Pair Corralation between Lithium Chile and Ultra Resources

If you would invest  1.00  in Ultra Resources on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Ultra Resources or generate 0.0% return on investment over 90 days.

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

Lithium Chile  vs.  Ultra Resources

Lithium Chile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ultra Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ultra Resources 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 Chile and Ultra Resources

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

The idea behind Lithium Chile and Ultra Resources 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.