Correlation Between HPQ Silicon and Lithium Americas

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

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

Diversification Opportunities for HPQ Silicon and Lithium Americas

-0.83

Correlation Coefficient

HPQ Silicon  Lithium Americas

Pay attention - limited upside

The 3 months correlation between HPQ and Lithium is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and HPQ Silicon 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 HPQ Silicon Resources are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of HPQ Silicon i.e., HPQ Silicon and Lithium Americas go up and down completely randomly.

Pair Corralation between HPQ Silicon and Lithium Americas

Assuming the 90 days horizon HPQ Silicon Resources is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, HPQ Silicon Resources is 1.51 times less risky than Lithium Americas. The stock trades about -0.19 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Lithium Americas Corp on September 20, 2024 and sell it today you would earn a total of  112.00  from holding Lithium Americas Corp or generate 36.01% return on investment over 90 days.

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

HPQ Silicon Resources  vs.  Lithium Americas Corp

HPQ Silicon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HPQ Silicon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lithium Americas Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HPQ Silicon and Lithium Americas

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

The idea behind HPQ Silicon Resources and Lithium Americas 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 Anywhere module to track or share privately all of your investments from the convenience of any device.