Correlation Between Piedmont Lithium and Aritzia

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

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

Diversification Opportunities for Piedmont Lithium and Aritzia

-0.54

Correlation Coefficient

Piedmont Lithium  Aritzia

Excellent diversification

The 3 months correlation between Piedmont and Aritzia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium Ltd and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia and Piedmont Lithium 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 Piedmont Lithium Ltd are associated (or correlated) with Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Piedmont Lithium i.e., Piedmont Lithium and Aritzia go up and down completely randomly.

Pair Corralation between Piedmont Lithium and Aritzia

Considering the 90-day investment horizon Piedmont Lithium Ltd is expected to under-perform the Aritzia. In addition to that, Piedmont Lithium is 1.72 times more volatile than Aritzia. It trades about -0.33 of its total potential returns per unit of risk. Aritzia is currently generating about 0.27 per unit of volatility. If you would invest  3,536  in Aritzia on October 12, 2024 and sell it today you would earn a total of  457.00  from holding Aritzia or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Piedmont Lithium Ltd  vs.  Aritzia

Piedmont Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Piedmont Lithium Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aritzia

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Piedmont Lithium and Aritzia

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

The idea behind Piedmont Lithium Ltd and Aritzia 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.