Correlation Between Core Lithium and MP Materials
Can any of the company-specific risk be diversified away by investing in both Core Lithium and MP Materials 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 MP Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Lithium and MP Materials Corp, you can compare the effects of market volatilities on Core Lithium and MP Materials 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 MP Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Lithium and MP Materials.
Diversification Opportunities for Core Lithium and MP Materials
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Core and MP Materials is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp 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 MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of Core Lithium i.e., Core Lithium and MP Materials go up and down completely randomly.
Pair Corralation between Core Lithium and MP Materials
Assuming the 90 days horizon Core Lithium is expected to under-perform the MP Materials. In addition to that, Core Lithium is 3.26 times more volatile than MP Materials Corp. It trades about -0.02 of its total potential returns per unit of risk. MP Materials Corp is currently generating about 0.07 per unit of volatility. If you would invest 1,776 in MP Materials Corp on September 13, 2024 and sell it today you would earn a total of 152.00 from holding MP Materials Corp or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Core Lithium vs. MP Materials Corp
Performance |
| Timeline |
| Core Lithium |
| MP Materials Corp |
Core Lithium and MP Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Lithium and MP Materials
The main advantage of trading using opposite Core Lithium and MP Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Lithium position performs unexpectedly, MP Materials 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 MP Materials will offset losses from the drop in MP Materials' long position.| Core Lithium vs. Qubec Nickel Corp | Core Lithium vs. IGO Limited | Core Lithium vs. Focus Graphite | Core Lithium vs. Mineral Res |
| MP Materials vs. Piedmont Lithium Ltd | MP Materials vs. Sigma Lithium Resources | MP Materials vs. Standard Lithium | MP Materials vs. Vale SA ADR |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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