Correlation Between Standard Lithium and Atico Mining

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

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

Diversification Opportunities for Standard Lithium and Atico Mining

0.4

Correlation Coefficient

Standard Lithium  Atico Mining

Very weak diversification

The 3 months correlation between Standard and Atico is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Atico Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atico Mining and Standard 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 Standard Lithium are associated (or correlated) with Atico Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atico Mining has no effect on the direction of Standard Lithium i.e., Standard Lithium and Atico Mining go up and down completely randomly.

Pair Corralation between Standard Lithium and Atico Mining

Considering the 90-day investment horizon Standard Lithium is expected to generate 1.15 times more return on investment than Atico Mining. However, Standard Lithium is 1.15 times more volatile than Atico Mining. It trades about 0.11 of its potential returns per unit of risk. Atico Mining is currently generating about -0.07 per unit of risk. If you would invest  119.00  in Standard Lithium on September 12, 2024 and sell it today you would earn a total of  48.00  from holding Standard Lithium or generate 40.34% return on investment over 90 days.

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

Standard Lithium  vs.  Atico Mining

Standard Lithium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady essential indicators, Standard Lithium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Atico Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atico Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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 Standard Lithium and Atico Mining

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

The idea behind Standard Lithium and Atico Mining 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.