Correlation Between Invesco Solar and Lithium Americas

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

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

Diversification Opportunities for Invesco Solar and Lithium Americas

-0.6

Correlation Coefficient

Invesco Solar  Lithium Americas

Excellent diversification

The 3 months correlation between Invesco and Lithium is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Solar ETF and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Invesco Solar 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 Invesco Solar ETF are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Invesco Solar i.e., Invesco Solar and Lithium Americas go up and down completely randomly.

Pair Corralation between Invesco Solar and Lithium Americas

Considering the 90-day investment horizon Invesco Solar ETF is expected to under-perform the Lithium Americas. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Solar ETF is 2.23 times less risky than Lithium Americas. The etf trades about -0.03 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Lithium Americas Corp on September 2, 2024 and sell it today you would earn a total of  172.00  from holding Lithium Americas Corp or generate 75.77% return on investment over 90 days.

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

Invesco Solar ETF  vs.  Lithium Americas Corp

Invesco Solar ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Solar ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco Solar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lithium Americas Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lithium Americas exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Solar and Lithium Americas

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

The idea behind Invesco Solar ETF and Lithium Americas 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.