Correlation Between CleanTech Lithium and BP PLC
Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium and BP PLC 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 CleanTech Lithium and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CleanTech Lithium plc and BP PLC ADR, you can compare the effects of market volatilities on CleanTech Lithium and BP PLC 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 CleanTech Lithium with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and BP PLC.
Diversification Opportunities for CleanTech Lithium and BP PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CleanTech and 0HKP is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and CleanTech Lithium 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 CleanTech Lithium plc are associated (or correlated) with BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC ADR has no effect on the direction of CleanTech Lithium i.e., CleanTech Lithium and BP PLC go up and down completely randomly.
Pair Corralation between CleanTech Lithium and BP PLC
Assuming the 90 days trading horizon CleanTech Lithium plc is expected to generate 1.69 times more return on investment than BP PLC. However, CleanTech Lithium is 1.69 times more volatile than BP PLC ADR. It trades about 0.1 of its potential returns per unit of risk. BP PLC ADR is currently generating about 0.17 per unit of risk. If you would invest 1,730 in CleanTech Lithium plc on September 14, 2024 and sell it today you would earn a total of 95.00 from holding CleanTech Lithium plc or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CleanTech Lithium plc vs. BP PLC ADR
Performance |
| Timeline |
| CleanTech Lithium plc |
| BP PLC ADR |
CleanTech Lithium and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CleanTech Lithium and BP PLC
The main advantage of trading using opposite CleanTech Lithium and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CleanTech Lithium position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| CleanTech Lithium vs. Hansa Investment | CleanTech Lithium vs. FC Investment Trust | CleanTech Lithium vs. Fevertree Drinks Plc | CleanTech Lithium vs. Edita Food Industries |
| BP PLC vs. Silvercorp Metals | BP PLC vs. CleanTech Lithium plc | BP PLC vs. Blackrock World Mining | BP PLC vs. Endeavour Mining Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |