Correlation Between Lithium Ionic and Alpha Copper

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

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

Diversification Opportunities for Lithium Ionic and Alpha Copper

0.07

Correlation Coefficient

Lithium Ionic  Alpha Copper

Significant diversification

The 3 months correlation between Lithium and Alpha is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Ionic Corp and Alpha Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Copper Corp and Lithium Ionic 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 Ionic Corp are associated (or correlated) with Alpha Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Copper Corp has no effect on the direction of Lithium Ionic i.e., Lithium Ionic and Alpha Copper go up and down completely randomly.

Pair Corralation between Lithium Ionic and Alpha Copper

Assuming the 90 days horizon Lithium Ionic is expected to generate 1.2 times less return on investment than Alpha Copper. But when comparing it to its historical volatility, Lithium Ionic Corp is 1.7 times less risky than Alpha Copper. It trades about 0.06 of its potential returns per unit of risk. Alpha Copper Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Alpha Copper Corp on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Alpha Copper Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Lithium Ionic Corp  vs.  Alpha Copper Corp

Lithium Ionic Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Ionic Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lithium Ionic reported solid returns over the last few months and may actually be approaching a breakup point.

Alpha Copper Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Copper Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alpha Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Ionic and Alpha Copper

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

The idea behind Lithium Ionic Corp and Alpha Copper 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.