Correlation Between Rock Tech and Lithium Americas

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Can any of the company-specific risk be diversified away by investing in both Rock Tech and Lithium Americas 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 Rock Tech and Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rock Tech Lithium and Lithium Americas Corp, you can compare the effects of market volatilities on Rock Tech and Lithium Americas 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 Rock Tech with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Tech and Lithium Americas.

Diversification Opportunities for Rock Tech and Lithium Americas

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Rock and Lithium is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Rock Tech 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 Rock Tech Lithium are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Rock Tech i.e., Rock Tech and Lithium Americas go up and down completely randomly.

Pair Corralation between Rock Tech and Lithium Americas

Assuming the 90 days horizon Rock Tech Lithium is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, Rock Tech Lithium is 1.26 times less risky than Lithium Americas. The stock trades about -0.04 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  365.00  in Lithium Americas Corp on September 28, 2024 and sell it today you would earn a total of  89.00  from holding Lithium Americas Corp or generate 24.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Rock Tech Lithium  vs.  Lithium Americas Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20020406080100
JavaScript chart by amCharts 3.21.15RCK LAC
       Timeline  
Rock Tech Lithium 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rock Tech Lithium 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.80.911.11.21.3
Lithium Americas Corp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3.544.555.566.57

Rock Tech and Lithium Americas Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.01-5.25-3.49-1.73-0.02791.623.294.966.638.3 0.0120.0140.0160.0180.020
JavaScript chart by amCharts 3.21.15RCK LAC
       Returns  

Pair Trading with Rock Tech and Lithium Americas

The main advantage of trading using opposite Rock Tech and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock Tech position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.
The idea behind Rock Tech Lithium and Lithium Americas 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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