Correlation Between Core Lithium and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both Core Lithium and Frontier Lithium 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 Core Lithium and Frontier Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Lithium and Frontier Lithium, you can compare the effects of market volatilities on Core Lithium and Frontier Lithium 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 Core Lithium with a short position of Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Lithium and Frontier Lithium.
Diversification Opportunities for Core Lithium and Frontier Lithium
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Core and Frontier is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium and Core 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 Core Lithium are associated (or correlated) with Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of Core Lithium i.e., Core Lithium and Frontier Lithium go up and down completely randomly.
Pair Corralation between Core Lithium and Frontier Lithium
Assuming the 90 days horizon Core Lithium is expected to generate 3.83 times more return on investment than Frontier Lithium. However, Core Lithium is 3.83 times more volatile than Frontier Lithium. It trades about 0.08 of its potential returns per unit of risk. Frontier Lithium is currently generating about -0.11 per unit of risk. If you would invest 4.70 in Core Lithium on September 10, 2024 and sell it today you would earn a total of 0.97 from holding Core Lithium or generate 20.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Core Lithium vs. Frontier Lithium
Performance |
Timeline |
Core Lithium |
Frontier Lithium |
Core Lithium and Frontier Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Core Lithium and Frontier Lithium
The main advantage of trading using opposite Core Lithium and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Lithium position performs unexpectedly, Frontier Lithium 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.Core Lithium vs. Macmahon Holdings Limited | Core Lithium vs. Prime Meridian Resources | Core Lithium vs. International Lithium Corp | Core Lithium vs. Hudson Resources |
Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core Lithium |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
CEOs Directory Screen CEOs from public companies around the world | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |