Correlation Between Talga Group and Lithium Energi

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

Diversification Opportunities for Talga Group and Lithium Energi

0.09

Correlation Coefficient

Talga Group  Lithium Energi

Significant diversification

The 3 months correlation between Talga and Lithium is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Lithium Energi Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Energi Explo 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 Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Energi Explo has no effect on the direction of Talga Group i.e., Talga Group and Lithium Energi go up and down completely randomly.

Pair Corralation between Talga Group and Lithium Energi

Assuming the 90 days horizon Talga Group is expected to generate 4.64 times less return on investment than Lithium Energi. But when comparing it to its historical volatility, Talga Group is 3.54 times less risky than Lithium Energi. It trades about 0.04 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.48  in Lithium Energi Exploration on December 29, 2024 and sell it today you would lose (0.95) from holding Lithium Energi Exploration or give up 38.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Talga Group  vs.  Lithium Energi Exploration

Talga Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group reported solid returns over the last few months and may actually be approaching a breakup point.

Lithium Energi Explo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lithium Energi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talga Group and Lithium Energi

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

The idea behind Talga Group and Lithium Energi Exploration 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.