Correlation Between Artemis Resources and Lithium Australia

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

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

Diversification Opportunities for Artemis Resources and Lithium Australia

-0.12

Correlation Coefficient

Artemis Resources  Lithium Australia

Good diversification

The 3 months correlation between Artemis and Lithium is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Artemis Resources and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia and Artemis Resources 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 Artemis Resources are associated (or correlated) with Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of Artemis Resources i.e., Artemis Resources and Lithium Australia go up and down completely randomly.

Pair Corralation between Artemis Resources and Lithium Australia

Assuming the 90 days horizon Artemis Resources is expected to generate 4.26 times less return on investment than Lithium Australia. But when comparing it to its historical volatility, Artemis Resources is 3.53 times less risky than Lithium Australia. It trades about 0.1 of its potential returns per unit of risk. Lithium Australia NL is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Lithium Australia NL on September 14, 2024 and sell it today you would earn a total of  0.97  from holding Lithium Australia NL or generate 9700.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Artemis Resources  vs.  Lithium Australia NL

Artemis Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Artemis Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Artemis Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Lithium Australia

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Artemis Resources and Lithium Australia

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

The idea behind Artemis Resources and Lithium Australia NL 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.