Correlation Between Lithium Americas and QMC Quantum

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

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

Diversification Opportunities for Lithium Americas and QMC Quantum

-0.6

Correlation Coefficient

Lithium Americas  QMC Quantum

Excellent diversification

The 3 months correlation between Lithium and QMC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and QMC Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QMC Quantum Minerals and Lithium Americas 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 Lithium Americas Corp are associated (or correlated) with QMC Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QMC Quantum Minerals has no effect on the direction of Lithium Americas i.e., Lithium Americas and QMC Quantum go up and down completely randomly.

Pair Corralation between Lithium Americas and QMC Quantum

Assuming the 90 days trading horizon Lithium Americas Corp is expected to under-perform the QMC Quantum. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.57 times less risky than QMC Quantum. The stock trades about -0.35 of its potential returns per unit of risk. The QMC Quantum Minerals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.00  in QMC Quantum Minerals on October 1, 2024 and sell it today you would earn a total of  0.50  from holding QMC Quantum Minerals or generate 10.0% return on investment over 90 days.

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

Lithium Americas Corp  vs.  QMC Quantum Minerals

Lithium Americas Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

QMC Quantum Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QMC Quantum Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, QMC Quantum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lithium Americas and QMC Quantum

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

The idea behind Lithium Americas Corp and QMC Quantum Minerals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.