Correlation Between Core Lithium and Patriot Battery
Can any of the company-specific risk be diversified away by investing in both Core Lithium and Patriot Battery 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 Patriot Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Lithium and Patriot Battery Metals, you can compare the effects of market volatilities on Core Lithium and Patriot Battery 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 Patriot Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Lithium and Patriot Battery.
Diversification Opportunities for Core Lithium and Patriot Battery
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Core and Patriot is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery Metals 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Core Lithium i.e., Core Lithium and Patriot Battery go up and down completely randomly.
Pair Corralation between Core Lithium and Patriot Battery
Assuming the 90 days horizon Core Lithium is expected to generate 2.91 times more return on investment than Patriot Battery. However, Core Lithium is 2.91 times more volatile than Patriot Battery Metals. It trades about -0.06 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.57 per unit of risk. If you would invest 8.25 in Core Lithium on August 29, 2024 and sell it today you would lose (1.75) from holding Core Lithium or give up 21.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Core Lithium vs. Patriot Battery Metals
Performance |
| Timeline |
| Core Lithium |
| Patriot Battery Metals |
Core Lithium and Patriot Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Lithium and Patriot Battery
The main advantage of trading using opposite Core Lithium and Patriot Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Lithium position performs unexpectedly, Patriot Battery 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 Patriot Battery will offset losses from the drop in Patriot Battery's long position.The idea behind Core Lithium and Patriot Battery Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Patriot Battery vs. Hannan Metals | Patriot Battery vs. Aldebaran Resources | Patriot Battery vs. Leading Edge Materials | Patriot Battery vs. Atco Mining |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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