Correlation Between Core Lithium and Vision Lithium
Can any of the company-specific risk be diversified away by investing in both Core Lithium and Vision 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 Core Lithium and Vision Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Lithium and Vision Lithium, you can compare the effects of market volatilities on Core Lithium and Vision 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 Core Lithium with a short position of Vision Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Lithium and Vision Lithium.
Diversification Opportunities for Core Lithium and Vision Lithium
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Core and Vision is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Vision Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vision Lithium and Core 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 Core Lithium are associated (or correlated) with Vision Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vision Lithium has no effect on the direction of Core Lithium i.e., Core Lithium and Vision Lithium go up and down completely randomly.
Pair Corralation between Core Lithium and Vision Lithium
Assuming the 90 days horizon Core Lithium is expected to generate 0.93 times more return on investment than Vision Lithium. However, Core Lithium is 1.07 times less risky than Vision Lithium. It trades about 0.05 of its potential returns per unit of risk. Vision Lithium is currently generating about 0.05 per unit of risk. If you would invest 6.50 in Core Lithium on November 27, 2024 and sell it today you would lose (0.87) from holding Core Lithium or give up 13.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.37% |
| Values | Daily Returns |
Core Lithium vs. Vision Lithium
Performance |
| Timeline |
| Core Lithium |
| Vision Lithium |
Core Lithium and Vision Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Lithium and Vision Lithium
The main advantage of trading using opposite Core Lithium and Vision Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Lithium position performs unexpectedly, Vision 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 Vision Lithium will offset losses from the drop in Vision Lithium's long position.| Core Lithium vs. Macmahon Holdings Limited | Core Lithium vs. Prime Meridian Resources | Core Lithium vs. International Lithium Corp | Core Lithium vs. Hudson Resources |
| Vision Lithium vs. Argosy Minerals Limited | Vision Lithium vs. Aurelia Metals Limited | Vision Lithium vs. Critical Elements | Vision Lithium vs. Artemis Resources |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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