Correlation Between Sayona Mining and POWR Lithium

Can any of the company-specific risk be diversified away by investing in both Sayona Mining and POWR 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 POWR 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 POWR Lithium Corp, you can compare the effects of market volatilities on Sayona Mining and POWR 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 POWR Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sayona Mining and POWR Lithium.

Diversification Opportunities for Sayona Mining and POWR Lithium

0.26

Correlation Coefficient

Sayona Mining  POWR Lithium

Modest diversification

The 3 months correlation between Sayona and POWR is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited and POWR Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWR Lithium Corp 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 POWR Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWR Lithium Corp has no effect on the direction of Sayona Mining i.e., Sayona Mining and POWR Lithium go up and down completely randomly.

Pair Corralation between Sayona Mining and POWR Lithium

Assuming the 90 days horizon Sayona Mining is expected to generate 96.35 times less return on investment than POWR Lithium. But when comparing it to its historical volatility, Sayona Mining Limited is 2.66 times less risky than POWR Lithium. It trades about 0.0 of its potential returns per unit of risk. POWR Lithium Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3.40  in POWR Lithium Corp on December 26, 2024 and sell it today you would earn a total of  0.72  from holding POWR Lithium Corp or generate 21.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Sayona Mining Limited  vs.  POWR Lithium Corp

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 nearly stable basic indicators, Sayona Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

POWR Lithium Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POWR Lithium Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, POWR Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sayona Mining and POWR Lithium

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

The idea behind Sayona Mining Limited and POWR Lithium Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.