Correlation Between Southern Cross and Galan Lithium

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

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

Diversification Opportunities for Southern Cross and Galan Lithium

-0.49

Correlation Coefficient

Southern Cross  Galan Lithium

Very good diversification

The 3 months correlation between Southern and Galan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Southern Cross Gold and Galan Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galan Lithium and Southern Cross 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 Southern Cross Gold are associated (or correlated) with Galan Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galan Lithium has no effect on the direction of Southern Cross i.e., Southern Cross and Galan Lithium go up and down completely randomly.

Pair Corralation between Southern Cross and Galan Lithium

Assuming the 90 days trading horizon Southern Cross Gold is expected to generate 0.85 times more return on investment than Galan Lithium. However, Southern Cross Gold is 1.17 times less risky than Galan Lithium. It trades about 0.11 of its potential returns per unit of risk. Galan Lithium is currently generating about 0.01 per unit of risk. If you would invest  317.00  in Southern Cross Gold on October 9, 2024 and sell it today you would earn a total of  62.00  from holding Southern Cross Gold or generate 19.56% return on investment over 90 days.

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

Southern Cross Gold  vs.  Galan Lithium

Southern Cross Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Cross Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Southern Cross unveiled solid returns over the last few months and may actually be approaching a breakup point.

Galan Lithium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Galan Lithium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Galan Lithium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Cross and Galan Lithium

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

The idea behind Southern Cross Gold and Galan Lithium 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.