Correlation Between Monarca Minerals and Lithium Energi

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

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

Diversification Opportunities for Monarca Minerals and Lithium Energi

0.12

Correlation Coefficient

Monarca Minerals  Lithium Energi

Average diversification

The 3 months correlation between Monarca and Lithium is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Monarca Minerals and Lithium Energi Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Energi Explo and Monarca Minerals 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 Monarca Minerals are associated (or correlated) with Lithium Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Energi Explo has no effect on the direction of Monarca Minerals i.e., Monarca Minerals and Lithium Energi go up and down completely randomly.

Pair Corralation between Monarca Minerals and Lithium Energi

Assuming the 90 days horizon Monarca Minerals is expected to under-perform the Lithium Energi. But the stock apears to be less risky and, when comparing its historical volatility, Monarca Minerals is 2.16 times less risky than Lithium Energi. The stock trades about -0.13 of its potential returns per unit of risk. The Lithium Energi Exploration is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Lithium Energi Exploration on October 14, 2024 and sell it today you would lose (1.50) from holding Lithium Energi Exploration or give up 33.33% of portfolio value over 90 days.

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

Monarca Minerals  vs.  Lithium Energi Exploration

Monarca Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lithium Energi Explo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lithium Energi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monarca Minerals and Lithium Energi

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

The idea behind Monarca Minerals and Lithium Energi Exploration 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.