Correlation Between Lithium Americas and Rock Tech

Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Rock Tech 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 Rock Tech 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 Rock Tech Lithium, you can compare the effects of market volatilities on Lithium Americas and Rock Tech 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 Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Rock Tech.

Diversification Opportunities for Lithium Americas and Rock Tech

-0.14

Correlation Coefficient

Lithium Americas  Rock Tech

Good diversification

The 3 months correlation between Lithium and Rock is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Lithium Americas i.e., Lithium Americas and Rock Tech go up and down completely randomly.

Pair Corralation between Lithium Americas and Rock Tech

Assuming the 90 days trading horizon Lithium Americas Corp is expected to generate 1.65 times more return on investment than Rock Tech. However, Lithium Americas is 1.65 times more volatile than Rock Tech Lithium. It trades about 0.1 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.12 per unit of risk. If you would invest  331.00  in Lithium Americas Corp on September 24, 2024 and sell it today you would earn a total of  96.00  from holding Lithium Americas Corp or generate 29.0% return on investment over 90 days.

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

Lithium Americas Corp  vs.  Rock Tech Lithium

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.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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.

Pair Trading with Lithium Americas and Rock Tech

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

The idea behind Lithium Americas Corp and Rock Tech Lithium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.