Correlation Between CleanTech Lithium and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium and Capital Drilling 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 Capital Drilling 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 Capital Drilling, you can compare the effects of market volatilities on CleanTech Lithium and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and Capital Drilling.
Diversification Opportunities for CleanTech Lithium and Capital Drilling
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CleanTech and Capital is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of CleanTech Lithium i.e., CleanTech Lithium and Capital Drilling go up and down completely randomly.
Pair Corralation between CleanTech Lithium and Capital Drilling
Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the Capital Drilling. In addition to that, CleanTech Lithium is 1.2 times more volatile than Capital Drilling. It trades about -0.07 of its total potential returns per unit of risk. Capital Drilling is currently generating about -0.01 per unit of volatility. If you would invest 8,400 in Capital Drilling on September 22, 2024 and sell it today you would lose (80.00) from holding Capital Drilling or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CleanTech Lithium plc vs. Capital Drilling
Performance |
| Timeline |
| CleanTech Lithium plc |
| Capital Drilling |
CleanTech Lithium and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CleanTech Lithium and Capital Drilling
The main advantage of trading using opposite CleanTech Lithium and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CleanTech Lithium position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| CleanTech Lithium vs. Givaudan SA | CleanTech Lithium vs. Antofagasta PLC | CleanTech Lithium vs. Ferrexpo PLC | CleanTech Lithium vs. Atalaya Mining |
| Capital Drilling vs. Lundin Mining Corp | Capital Drilling vs. Dolly Varden Silver | Capital Drilling vs. CleanTech Lithium plc | Capital Drilling vs. Hochschild Mining plc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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