Correlation Between Lifezone Metals and Foremost Lithium

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

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

Diversification Opportunities for Lifezone Metals and Foremost Lithium

0.72

Correlation Coefficient

Lifezone Metals  Foremost Lithium

Poor diversification

The 3 months correlation between Lifezone and Foremost is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lifezone Metals Limited and Foremost Lithium Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foremost Lithium Resource and Lifezone Metals 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 Lifezone Metals Limited are associated (or correlated) with Foremost Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foremost Lithium Resource has no effect on the direction of Lifezone Metals i.e., Lifezone Metals and Foremost Lithium go up and down completely randomly.

Pair Corralation between Lifezone Metals and Foremost Lithium

Considering the 90-day investment horizon Lifezone Metals Limited is expected to generate 0.15 times more return on investment than Foremost Lithium. However, Lifezone Metals Limited is 6.79 times less risky than Foremost Lithium. It trades about -0.27 of its potential returns per unit of risk. Foremost Lithium Resource is currently generating about -0.05 per unit of risk. If you would invest  699.00  in Lifezone Metals Limited on December 30, 2024 and sell it today you would lose (253.00) from holding Lifezone Metals Limited or give up 36.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.39%
Values	Daily Returns

Lifezone Metals Limited  vs.  Foremost Lithium Resource

Lifezone Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifezone Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Foremost Lithium Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foremost Lithium Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lifezone Metals and Foremost Lithium

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

The idea behind Lifezone Metals Limited and Foremost Lithium Resource 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.