Correlation Between Sienna Resources and Lithium Ionic

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

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

Diversification Opportunities for Sienna Resources and Lithium Ionic

0.04

Correlation Coefficient

Sienna Resources  Lithium Ionic

Significant diversification

The 3 months correlation between Sienna and Lithium is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Resources and Lithium Ionic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Ionic Corp and Sienna Resources 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 Sienna Resources are associated (or correlated) with Lithium Ionic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Ionic Corp has no effect on the direction of Sienna Resources i.e., Sienna Resources and Lithium Ionic go up and down completely randomly.

Pair Corralation between Sienna Resources and Lithium Ionic

Assuming the 90 days horizon Sienna Resources is expected to under-perform the Lithium Ionic. In addition to that, Sienna Resources is 1.6 times more volatile than Lithium Ionic Corp. It trades about -0.02 of its total potential returns per unit of risk. Lithium Ionic Corp is currently generating about 0.06 per unit of volatility. If you would invest  48.00  in Lithium Ionic Corp on September 15, 2024 and sell it today you would earn a total of  6.00  from holding Lithium Ionic Corp or generate 12.5% return on investment over 90 days.

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

Sienna Resources  vs.  Lithium Ionic Corp

Sienna Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Sienna Resources and Lithium Ionic

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

The idea behind Sienna Resources and Lithium Ionic 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.