Correlation Between STL Technology and Advanced Lithium
Can any of the company-specific risk be diversified away by investing in both STL Technology and Advanced 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 STL Technology and Advanced Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STL Technology Co and Advanced Lithium Electrochemistry, you can compare the effects of market volatilities on STL Technology and Advanced 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 STL Technology with a short position of Advanced Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of STL Technology and Advanced Lithium.
Diversification Opportunities for STL Technology and Advanced Lithium
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STL and Advanced is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Advanced Lithium Electrochemis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Lithium Ele and STL Technology 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 STL Technology Co are associated (or correlated) with Advanced Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Lithium Ele has no effect on the direction of STL Technology i.e., STL Technology and Advanced Lithium go up and down completely randomly.
Pair Corralation between STL Technology and Advanced Lithium
Assuming the 90 days trading horizon STL Technology is expected to generate 43.81 times less return on investment than Advanced Lithium. But when comparing it to its historical volatility, STL Technology Co is 25.58 times less risky than Advanced Lithium. It trades about 0.03 of its potential returns per unit of risk. Advanced Lithium Electrochemistry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,176 in Advanced Lithium Electrochemistry on September 5, 2024 and sell it today you would lose (4,021) from holding Advanced Lithium Electrochemistry or give up 49.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
STL Technology Co vs. Advanced Lithium Electrochemis
Performance |
| Timeline |
| STL Technology |
| Advanced Lithium Ele |
STL Technology and Advanced Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STL Technology and Advanced Lithium
The main advantage of trading using opposite STL Technology and Advanced Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STL Technology position performs unexpectedly, Advanced 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 Advanced Lithium will offset losses from the drop in Advanced Lithium's long position.| STL Technology vs. Eclat Textile Co | STL Technology vs. WiseChip Semiconductor | STL Technology vs. Novatek Microelectronics Corp | STL Technology vs. Leader Electronics |
| Advanced Lithium vs. Eclat Textile Co | Advanced Lithium vs. WiseChip Semiconductor | Advanced Lithium vs. Novatek Microelectronics Corp | Advanced Lithium vs. Leader Electronics |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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