Correlation Between Boot Barn and LithiumBank Resources

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

By analyzing existing cross correlation between Boot Barn Holdings and LithiumBank Resources Corp, you can compare the effects of market volatilities on Boot Barn and LithiumBank Resources 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 Boot Barn with a short position of LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boot Barn and LithiumBank Resources.

Diversification Opportunities for Boot Barn and LithiumBank Resources

0.69

Correlation Coefficient

Boot Barn  LithiumBank Resources

Poor diversification

The 3 months correlation between Boot and LithiumBank is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources and Boot Barn 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 Boot Barn Holdings are associated (or correlated) with LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Boot Barn i.e., Boot Barn and LithiumBank Resources go up and down completely randomly.

Pair Corralation between Boot Barn and LithiumBank Resources

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 0.62 times more return on investment than LithiumBank Resources. However, Boot Barn Holdings is 1.62 times less risky than LithiumBank Resources. It trades about 0.05 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about 0.02 per unit of risk. If you would invest  14,545  in Boot Barn Holdings on September 24, 2024 and sell it today you would earn a total of  307.00  from holding Boot Barn Holdings or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Boot Barn Holdings  vs.  LithiumBank Resources Corp

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

LithiumBank Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LithiumBank Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boot Barn and LithiumBank Resources

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

The idea behind Boot Barn Holdings and LithiumBank Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.