Correlation Between POWR Lithium and Argosy Minerals

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

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

Diversification Opportunities for POWR Lithium and Argosy Minerals

0.09

Correlation Coefficient

POWR Lithium  Argosy Minerals

Significant diversification

The 3 months correlation between POWR and Argosy is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding POWR Lithium Corp and Argosy Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argosy Minerals and POWR 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 POWR Lithium Corp are associated (or correlated) with Argosy Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argosy Minerals has no effect on the direction of POWR Lithium i.e., POWR Lithium and Argosy Minerals go up and down completely randomly.

Pair Corralation between POWR Lithium and Argosy Minerals

Assuming the 90 days horizon POWR Lithium is expected to generate 1.2 times less return on investment than Argosy Minerals. In addition to that, POWR Lithium is 1.69 times more volatile than Argosy Minerals Limited. It trades about 0.02 of its total potential returns per unit of risk. Argosy Minerals Limited is currently generating about 0.05 per unit of volatility. If you would invest  1.76  in Argosy Minerals Limited on December 2, 2024 and sell it today you would lose (0.09) from holding Argosy Minerals Limited or give up 5.11% of portfolio value over 90 days.

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

POWR Lithium Corp  vs.  Argosy Minerals Limited

POWR Lithium Corp

Risk-Adjusted Performance

Weak

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

Argosy Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argosy Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Argosy Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with POWR Lithium and Argosy Minerals

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

The idea behind POWR Lithium Corp and Argosy Minerals Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.