Correlation Between Sayona Mining and Piedmont Lithium

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

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

Diversification Opportunities for Sayona Mining and Piedmont Lithium

0.87

Correlation Coefficient

Sayona Mining  Piedmont Lithium

Very poor diversification

The 3 months correlation between Sayona and Piedmont is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium and Sayona Mining 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 Sayona Mining Limited are associated (or correlated) with Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Sayona Mining i.e., Sayona Mining and Piedmont Lithium go up and down completely randomly.

Pair Corralation between Sayona Mining and Piedmont Lithium

Assuming the 90 days horizon Sayona Mining Limited is expected to generate 2.06 times more return on investment than Piedmont Lithium. However, Sayona Mining is 2.06 times more volatile than Piedmont Lithium Ltd. It trades about -0.07 of its potential returns per unit of risk. Piedmont Lithium Ltd is currently generating about -0.23 per unit of risk. If you would invest  2.03  in Sayona Mining Limited on November 28, 2024 and sell it today you would lose (0.67) from holding Sayona Mining Limited or give up 33.0% of portfolio value over 90 days.

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

Sayona Mining Limited  vs.  Piedmont Lithium Ltd

Sayona Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sayona Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Piedmont Lithium

Risk-Adjusted Performance

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sayona Mining and Piedmont Lithium

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

The idea behind Sayona Mining Limited and Piedmont Lithium Ltd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.