Correlation Between Lithium Energi and Ascendant Resources

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

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

Diversification Opportunities for Lithium Energi and Ascendant Resources

-0.31

Correlation Coefficient

Lithium Energi  Ascendant Resources

Very good diversification

The 3 months correlation between Lithium and Ascendant is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Energi Exploration and Ascendant Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendant Resources and Lithium Energi 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 Energi Exploration are associated (or correlated) with Ascendant Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendant Resources has no effect on the direction of Lithium Energi i.e., Lithium Energi and Ascendant Resources go up and down completely randomly.

Pair Corralation between Lithium Energi and Ascendant Resources

Assuming the 90 days horizon Lithium Energi Exploration is expected to generate 2.24 times more return on investment than Ascendant Resources. However, Lithium Energi is 2.24 times more volatile than Ascendant Resources. It trades about 0.05 of its potential returns per unit of risk. Ascendant Resources is currently generating about 0.09 per unit of risk. If you would invest  2.48  in Lithium Energi Exploration on December 30, 2024 and sell it today you would lose (0.95) from holding Lithium Energi Exploration or give up 38.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Lithium Energi Exploration  vs.  Ascendant Resources

Lithium Energi Explo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lithium Energi reported solid returns over the last few months and may actually be approaching a breakup point.

Ascendant Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendant Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ascendant Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Energi and Ascendant Resources

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

The idea behind Lithium Energi Exploration and Ascendant 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.