Correlation Between Piedmont Lithium and Sassy Resources

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

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

Diversification Opportunities for Piedmont Lithium and Sassy Resources

0.24

Correlation Coefficient

Piedmont Lithium  Sassy Resources

Modest diversification

The 3 months correlation between Piedmont and Sassy is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium and Sassy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sassy Resources 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 are associated (or correlated) with Sassy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sassy Resources has no effect on the direction of Piedmont Lithium i.e., Piedmont Lithium and Sassy Resources go up and down completely randomly.

Pair Corralation between Piedmont Lithium and Sassy Resources

Assuming the 90 days horizon Piedmont Lithium is expected to generate 1.13 times more return on investment than Sassy Resources. However, Piedmont Lithium is 1.13 times more volatile than Sassy Resources. It trades about 0.04 of its potential returns per unit of risk. Sassy Resources is currently generating about 0.02 per unit of risk. If you would invest  8.85  in Piedmont Lithium on December 30, 2024 and sell it today you would lose (1.58) from holding Piedmont Lithium or give up 17.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Piedmont Lithium  vs.  Sassy Resources

Piedmont Lithium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Piedmont Lithium disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sassy Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sassy Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sassy Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Piedmont Lithium and Sassy Resources

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

The idea behind Piedmont Lithium and Sassy Resources 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.