Correlation Between Lithium Americas and Pollard Banknote

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

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

Diversification Opportunities for Lithium Americas and Pollard Banknote

-0.57

Correlation Coefficient

Lithium Americas  Pollard Banknote

Excellent diversification

The 3 months correlation between Lithium and Pollard is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Pollard Banknote Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pollard Banknote and Lithium Americas 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 Americas Corp are associated (or correlated) with Pollard Banknote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pollard Banknote has no effect on the direction of Lithium Americas i.e., Lithium Americas and Pollard Banknote go up and down completely randomly.

Pair Corralation between Lithium Americas and Pollard Banknote

Assuming the 90 days trading horizon Lithium Americas Corp is expected to under-perform the Pollard Banknote. In addition to that, Lithium Americas is 2.43 times more volatile than Pollard Banknote Limited. It trades about -0.31 of its total potential returns per unit of risk. Pollard Banknote Limited is currently generating about -0.33 per unit of volatility. If you would invest  2,566  in Pollard Banknote Limited on September 28, 2024 and sell it today you would lose (216.00) from holding Pollard Banknote Limited or give up 8.42% of portfolio value over 90 days.

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

Lithium Americas Corp  vs.  Pollard Banknote Limited

Lithium Americas Corp

Risk-Adjusted Performance

7 of 100

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.

Pollard Banknote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pollard Banknote Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lithium Americas and Pollard Banknote

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

The idea behind Lithium Americas Corp and Pollard Banknote Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.