Correlation Between Critical Elements and Core Lithium
Can any of the company-specific risk be diversified away by investing in both Critical Elements and Core 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 Critical Elements and Core Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Critical Elements and Core Lithium, you can compare the effects of market volatilities on Critical Elements and Core 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 Critical Elements with a short position of Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Core Lithium.
Diversification Opportunities for Critical Elements and Core Lithium
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Critical and Core is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Critical Elements 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 Critical Elements are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Critical Elements i.e., Critical Elements and Core Lithium go up and down completely randomly.
Pair Corralation between Critical Elements and Core Lithium
Assuming the 90 days horizon Critical Elements is expected to under-perform the Core Lithium. But the otc stock apears to be less risky and, when comparing its historical volatility, Critical Elements is 2.03 times less risky than Core Lithium. The otc stock trades about -0.07 of its potential returns per unit of risk. The Core Lithium is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 75.00 in Core Lithium on September 1, 2024 and sell it today you would lose (68.80) from holding Core Lithium or give up 91.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Critical Elements vs. Core Lithium
Performance |
| Timeline |
| Critical Elements |
| Core Lithium |
Critical Elements and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Critical Elements and Core Lithium
The main advantage of trading using opposite Critical Elements and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Elements position performs unexpectedly, Core 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 Core Lithium will offset losses from the drop in Core Lithium's long position.| Critical Elements vs. Argosy Minerals Limited | Critical Elements vs. Aurelia Metals Limited | Critical Elements vs. Artemis Resources | Critical Elements vs. Ascendant Resources |
| Core Lithium vs. ATT Inc | Core Lithium vs. Merck Company | Core Lithium vs. Walt Disney | Core Lithium vs. Caterpillar |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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