Correlation Between Lithium Energi and QMC Quantum

Can any of the company-specific risk be diversified away by investing in both Lithium Energi 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 Energi 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 Energi Exploration and QMC Quantum Minerals, you can compare the effects of market volatilities on Lithium Energi 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 Energi with a short position of QMC Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Energi and QMC Quantum.

Diversification Opportunities for Lithium Energi and QMC Quantum

0.35

Correlation Coefficient

Lithium Energi  QMC Quantum

Weak diversification

The 3 months correlation between Lithium and QMC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Energi Exploration 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 Energi 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 Energi Exploration 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 Energi i.e., Lithium Energi and QMC Quantum go up and down completely randomly.

Pair Corralation between Lithium Energi and QMC Quantum

Assuming the 90 days trading horizon Lithium Energi Exploration is expected to generate 3.12 times more return on investment than QMC Quantum. However, Lithium Energi is 3.12 times more volatile than QMC Quantum Minerals. It trades about 0.06 of its potential returns per unit of risk. QMC Quantum Minerals is currently generating about 0.03 per unit of risk. If you would invest  4.00  in Lithium Energi Exploration on September 22, 2024 and sell it today you would lose (0.50) from holding Lithium Energi Exploration or give up 12.5% of portfolio value over 90 days.

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

Lithium Energi Exploration  vs.  QMC Quantum Minerals

Lithium Energi Explo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Energi Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lithium Energi showed solid returns over the last few months and may actually be approaching a breakup point.

QMC Quantum Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QMC Quantum Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lithium Energi and QMC Quantum

The main advantage of trading using opposite Lithium Energi and QMC Quantum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Energi 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 Energi Exploration 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.