Correlation Between Lithium Americas and Critical Metals

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

Diversification Opportunities for Lithium Americas and Critical Metals

0.73

Correlation Coefficient

Lithium Americas  Critical Metals

Poor diversification

The 3 months correlation between Lithium and Critical is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Critical Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Metals 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 Critical Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Metals Corp has no effect on the direction of Lithium Americas i.e., Lithium Americas and Critical Metals go up and down completely randomly.

Pair Corralation between Lithium Americas and Critical Metals

Considering the 90-day investment horizon Lithium Americas Corp is expected to generate 1.14 times more return on investment than Critical Metals. However, Lithium Americas is 1.14 times more volatile than Critical Metals Corp. It trades about 0.11 of its potential returns per unit of risk. Critical Metals Corp is currently generating about 0.06 per unit of risk. If you would invest  288.00  in Lithium Americas Corp on August 26, 2025 and sell it today you would earn a total of  199.00  from holding Lithium Americas Corp or generate 69.1% return on investment over 90 days.

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

Lithium Americas Corp  vs.  Critical Metals Corp

Lithium Americas Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Lithium Americas exhibited solid returns over the last few months and may actually be approaching a breakup point.

Critical Metals Corp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile primary indicators, Critical Metals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithium Americas and Critical Metals

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

The idea behind Lithium Americas Corp and Critical Metals 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.