Correlation Between International Lithium and Interra Copper

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

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

Diversification Opportunities for International Lithium and Interra Copper

0.15

Correlation Coefficient

International Lithium  Interra Copper

Average diversification

The 3 months correlation between International and Interra is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding International Lithium Corp and Interra Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interra Copper Corp and International 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 International Lithium Corp are associated (or correlated) with Interra Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interra Copper Corp has no effect on the direction of International Lithium i.e., International Lithium and Interra Copper go up and down completely randomly.

Pair Corralation between International Lithium and Interra Copper

Assuming the 90 days horizon International Lithium is expected to generate 3.05 times less return on investment than Interra Copper. But when comparing it to its historical volatility, International Lithium Corp is 1.52 times less risky than Interra Copper. It trades about 0.02 of its potential returns per unit of risk. Interra Copper Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8.30  in Interra Copper Corp on September 12, 2024 and sell it today you would lose (1.75) from holding Interra Copper Corp or give up 21.08% of portfolio value over 90 days.

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

International Lithium Corp  vs.  Interra Copper Corp

International Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Lithium Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, International Lithium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Interra Copper Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Interra Copper Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Interra Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Lithium and Interra Copper

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

The idea behind International Lithium Corp and Interra Copper 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.