Correlation Between Standard Lithium and Patriot Battery

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

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

Diversification Opportunities for Standard Lithium and Patriot Battery

0.44

Correlation Coefficient

Standard Lithium  Patriot Battery

Very weak diversification

The 3 months correlation between Standard and Patriot is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery Metals and Standard 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 Standard Lithium are associated (or correlated) with Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Standard Lithium i.e., Standard Lithium and Patriot Battery go up and down completely randomly.

Pair Corralation between Standard Lithium and Patriot Battery

Considering the 90-day investment horizon Standard Lithium is expected to generate 0.99 times more return on investment than Patriot Battery. However, Standard Lithium is 1.01 times less risky than Patriot Battery. It trades about 0.22 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about 0.05 per unit of risk. If you would invest  146.00  in Standard Lithium on October 21, 2024 and sell it today you would earn a total of  22.00  from holding Standard Lithium or generate 15.07% return on investment over 90 days.

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

Standard Lithium  vs.  Patriot Battery Metals

Standard Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Patriot Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Standard Lithium and Patriot Battery

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

The idea behind Standard Lithium and Patriot Battery Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.