Correlation Between Talga Group and Lithium Ionic

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

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

Diversification Opportunities for Talga Group and Lithium Ionic

0.22

Correlation Coefficient

Talga Group  Lithium Ionic

Modest diversification

The 3 months correlation between Talga and Lithium is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Lithium Ionic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Ionic Corp and Talga Group 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 Talga Group are associated (or correlated) with Lithium Ionic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Ionic Corp has no effect on the direction of Talga Group i.e., Talga Group and Lithium Ionic go up and down completely randomly.

Pair Corralation between Talga Group and Lithium Ionic

Assuming the 90 days horizon Talga Group is expected to generate 1.11 times less return on investment than Lithium Ionic. In addition to that, Talga Group is 1.84 times more volatile than Lithium Ionic Corp. It trades about 0.02 of its total potential returns per unit of risk. Lithium Ionic Corp is currently generating about 0.03 per unit of volatility. If you would invest  63.00  in Lithium Ionic Corp on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Lithium Ionic Corp or generate 3.17% return on investment over 90 days.

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

Talga Group  vs.  Lithium Ionic Corp

Talga Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lithium Ionic Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Ionic Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lithium Ionic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Talga Group and Lithium Ionic

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

The idea behind Talga Group and Lithium Ionic 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.

Check out your portfolio center.

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.