Correlation Between Lithium Australia and Themac Resources

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

Diversification Opportunities for Lithium Australia and Themac Resources

-0.06

Correlation Coefficient

Lithium Australia  Themac Resources

Good diversification

The 3 months correlation between Lithium and Themac is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Australia NL and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac 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 Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of Lithium Australia i.e., Lithium Australia and Themac Resources go up and down completely randomly.

Pair Corralation between Lithium Australia and Themac Resources

Assuming the 90 days horizon Lithium Australia NL is expected to generate 5.68 times more return on investment than Themac Resources. However, Lithium Australia is 5.68 times more volatile than Themac Resources Group. It trades about 0.13 of its potential returns per unit of risk. Themac Resources Group is currently generating about 0.09 per unit of risk. If you would invest  0.01  in Lithium Australia NL on September 15, 2024 and sell it today you would earn a total of  0.97  from holding Lithium Australia NL or generate 9700.0% return on investment over 90 days.

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

Lithium Australia NL  vs.  Themac Resources Group

Lithium Australia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Australia NL are ranked lower than 9 (%) 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.

Themac Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Themac Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Australia and Themac Resources

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

The idea behind Lithium Australia NL and Themac Resources Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.