Correlation Between Lithium Australia and Golden Goliath

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

By analyzing existing cross correlation between Lithium Australia NL and Golden Goliath Resources, you can compare the effects of market volatilities on Lithium Australia and Golden Goliath 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 Australia with a short position of Golden Goliath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Australia and Golden Goliath.

Diversification Opportunities for Lithium Australia and Golden Goliath

0.16

Correlation Coefficient

Lithium Australia  Golden Goliath

Average diversification

The 3 months correlation between Lithium and Golden is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Golden Goliath Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Goliath Resources and Lithium Australia 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 Australia NL are associated (or correlated) with Golden Goliath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Goliath Resources has no effect on the direction of Lithium Australia i.e., Lithium Australia and Golden Goliath go up and down completely randomly.

Pair Corralation between Lithium Australia and Golden Goliath

Assuming the 90 days horizon Lithium Australia is expected to generate 1.23 times less return on investment than Golden Goliath. In addition to that, Lithium Australia is 1.29 times more volatile than Golden Goliath Resources. It trades about 0.13 of its total potential returns per unit of risk. Golden Goliath Resources is currently generating about 0.2 per unit of volatility. If you would invest  9.00  in Golden Goliath Resources on September 14, 2024 and sell it today you would lose (6.99) from holding Golden Goliath Resources or give up 77.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

Lithium Australia NL  vs.  Golden Goliath Resources

Lithium Australia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Australia NL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Lithium Australia reported solid returns over the last few months and may actually be approaching a breakup point.

Golden Goliath Resources

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Goliath Resources are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Golden Goliath reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Australia and Golden Goliath

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

The idea behind Lithium Australia NL and Golden Goliath Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.