Correlation Between Lithium Americas and Québec Nickel

Can any of the company-specific risk be diversified away by investing in both Lithium Americas and Québec Nickel 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 Québec Nickel 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 Qubec Nickel Corp, you can compare the effects of market volatilities on Lithium Americas and Québec Nickel 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 Québec Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and Québec Nickel.

Diversification Opportunities for Lithium Americas and Québec Nickel

-0.72

Correlation Coefficient

Lithium Americas  Québec Nickel

Pay attention - limited upside

The 3 months correlation between Lithium and Québec is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Qubec Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qubec Nickel Corp 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 Québec Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qubec Nickel Corp has no effect on the direction of Lithium Americas i.e., Lithium Americas and Québec Nickel go up and down completely randomly.

Pair Corralation between Lithium Americas and Québec Nickel

Considering the 90-day investment horizon Lithium Americas Corp is expected to under-perform the Québec Nickel. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.13 times less risky than Québec Nickel. The stock trades about -0.1 of its potential returns per unit of risk. The Qubec Nickel Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.56  in Qubec Nickel Corp on March 3, 2024 and sell it today you would earn a total of  3.44  from holding Qubec Nickel Corp or generate 45.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

Lithium Americas Corp  vs.  Qubec Nickel Corp

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Qubec Nickel Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qubec Nickel Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Québec Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Americas and Québec Nickel

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

The idea behind Lithium Americas Corp and Qubec Nickel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.