Correlation Between Frontier Lithium and E3 Metals

Can any of the company-specific risk be diversified away by investing in both Frontier Lithium and E3 Metals 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 Frontier Lithium and E3 Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Frontier Lithium and E3 Metals Corp, you can compare the effects of market volatilities on Frontier Lithium and E3 Metals 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 Frontier Lithium with a short position of E3 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Lithium and E3 Metals.

Diversification Opportunities for Frontier Lithium and E3 Metals

0.93

Correlation Coefficient

Frontier Lithium  E3 Metals

Almost no diversification

The 3 months correlation between Frontier and EEMMF is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Lithium and E3 Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 Metals Corp and Frontier 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 Frontier Lithium are associated (or correlated) with E3 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 Metals Corp has no effect on the direction of Frontier Lithium i.e., Frontier Lithium and E3 Metals go up and down completely randomly.

Pair Corralation between Frontier Lithium and E3 Metals

Assuming the 90 days horizon Frontier Lithium is expected to under-perform the E3 Metals. In addition to that, Frontier Lithium is 1.36 times more volatile than E3 Metals Corp. It trades about -0.18 of its total potential returns per unit of risk. E3 Metals Corp is currently generating about -0.16 per unit of volatility. If you would invest  86.00  in E3 Metals Corp on September 26, 2024 and sell it today you would lose (22.00) from holding E3 Metals Corp or give up 25.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Frontier Lithium  vs.  E3 Metals Corp

Frontier Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

E3 Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E3 Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Frontier Lithium and E3 Metals

The main advantage of trading using opposite Frontier Lithium and E3 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Lithium position performs unexpectedly, E3 Metals 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 E3 Metals will offset losses from the drop in E3 Metals' long position.

The idea behind Frontier Lithium and E3 Metals 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.