Correlation Between Lithium Energi and Talga Group

Can any of the company-specific risk be diversified away by investing in both Lithium Energi and Talga Group 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 Talga Group 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 Talga Group, you can compare the effects of market volatilities on Lithium Energi and Talga Group 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 Talga Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Energi and Talga Group.

Diversification Opportunities for Lithium Energi and Talga Group

0.09

Correlation Coefficient

Lithium Energi  Talga Group

Significant diversification

The 3 months correlation between Lithium and Talga is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Energi Exploration and Talga Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talga Group 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 Talga Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talga Group has no effect on the direction of Lithium Energi i.e., Lithium Energi and Talga Group go up and down completely randomly.

Pair Corralation between Lithium Energi and Talga Group

Assuming the 90 days horizon Lithium Energi Exploration is expected to generate 3.54 times more return on investment than Talga Group. However, Lithium Energi is 3.54 times more volatile than Talga Group. It trades about 0.05 of its potential returns per unit of risk. Talga Group is currently generating about 0.04 per unit of risk. If you would invest  2.48  in Lithium Energi Exploration on December 29, 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 Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Lithium Energi Exploration  vs.  Talga Group

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.

Talga Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Energi and Talga Group

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

The idea behind Lithium Energi Exploration and Talga Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.