Correlation Between Vision Lithium and Sayona Mining

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

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

Diversification Opportunities for Vision Lithium and Sayona Mining

0.24

Correlation Coefficient

Vision Lithium  Sayona Mining

Modest diversification

The 3 months correlation between Vision and Sayona is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vision Lithium and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited and Vision Lithium 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 Vision Lithium are associated (or correlated) with Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of Vision Lithium i.e., Vision Lithium and Sayona Mining go up and down completely randomly.

Pair Corralation between Vision Lithium and Sayona Mining

Assuming the 90 days horizon Vision Lithium is expected to generate 1.64 times more return on investment than Sayona Mining. However, Vision Lithium is 1.64 times more volatile than Sayona Mining Limited. It trades about 0.05 of its potential returns per unit of risk. Sayona Mining Limited is currently generating about 0.08 per unit of risk. If you would invest  1.67  in Vision Lithium on September 3, 2024 and sell it today you would lose (0.08) from holding Vision Lithium or give up 4.79% of portfolio value over 90 days.

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

Vision Lithium  vs.  Sayona Mining Limited

Vision Lithium

Risk-Adjusted Performance

4 of 100

Insignificant

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

Sayona Mining Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sayona Mining Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sayona Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vision Lithium and Sayona Mining

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

The idea behind Vision Lithium and Sayona Mining Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .