Correlation Between PJX Resources and Lithium Energi

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

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

Diversification Opportunities for PJX Resources and Lithium Energi

0.76

Correlation Coefficient

PJX Resources  Lithium Energi

Poor diversification

The 3 months correlation between PJX and Lithium is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PJX Resources 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 PJX Resources 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 PJX Resources 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 PJX Resources i.e., PJX Resources and Lithium Energi go up and down completely randomly.

Pair Corralation between PJX Resources and Lithium Energi

Assuming the 90 days horizon PJX Resources is expected to generate 2.55 times less return on investment than Lithium Energi. But when comparing it to its historical volatility, PJX Resources is 2.06 times less risky than Lithium Energi. It trades about 0.07 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Lithium Energi Exploration on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Lithium Energi Exploration or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

PJX Resources  vs.  Lithium Energi Exploration

PJX Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJX Resources 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 January 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lithium Energi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PJX Resources and Lithium Energi

The main advantage of trading using opposite PJX Resources and Lithium Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PJX Resources 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 PJX Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.