Correlation Between Alpha Lithium and Piedmont Lithium

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

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

Diversification Opportunities for Alpha Lithium and Piedmont Lithium

0.25

Correlation Coefficient

Alpha Lithium  Piedmont Lithium

Modest diversification

The 3 months correlation between Alpha and Piedmont is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Lithium and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium and Alpha 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 Alpha Lithium are associated (or correlated) with Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Alpha Lithium i.e., Alpha Lithium and Piedmont Lithium go up and down completely randomly.

Pair Corralation between Alpha Lithium and Piedmont Lithium

Assuming the 90 days horizon Alpha Lithium is expected to generate 5.24 times more return on investment than Piedmont Lithium. However, Alpha Lithium is 5.24 times more volatile than Piedmont Lithium Ltd. It trades about 0.08 of its potential returns per unit of risk. Piedmont Lithium Ltd is currently generating about 0.02 per unit of risk. If you would invest  12.00  in Alpha Lithium on May 5, 2025 and sell it today you would lose (3.00) from holding Alpha Lithium or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alpha Lithium  vs.  Piedmont Lithium Ltd

Alpha Lithium

Risk-Adjusted Performance

Modest

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

Piedmont Lithium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Lithium Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Piedmont Lithium is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alpha Lithium and Piedmont Lithium

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

The idea behind Alpha Lithium and Piedmont Lithium Ltd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.