Correlation Between European Metals and Core Lithium
Can any of the company-specific risk be diversified away by investing in both European Metals and Core 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 European Metals and Core Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Core Lithium, you can compare the effects of market volatilities on European Metals and Core 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 European Metals with a short position of Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Core Lithium.
Diversification Opportunities for European Metals and Core Lithium
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between European and Core is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and European Metals 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 European Metals Holdings are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of European Metals i.e., European Metals and Core Lithium go up and down completely randomly.
Pair Corralation between European Metals and Core Lithium
Assuming the 90 days horizon European Metals is expected to generate 2.41 times less return on investment than Core Lithium. But when comparing it to its historical volatility, European Metals Holdings is 1.38 times less risky than Core Lithium. It trades about 0.01 of its potential returns per unit of risk. Core Lithium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Core Lithium on October 22, 2024 and sell it today you would lose (7.78) from holding Core Lithium or give up 59.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
European Metals Holdings vs. Core Lithium
Performance |
| Timeline |
| European Metals Holdings |
| Core Lithium |
European Metals and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Core Lithium
The main advantage of trading using opposite European Metals and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Core 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 Core Lithium will offset losses from the drop in Core Lithium's long position.| European Metals vs. Aurelia Metals Limited | European Metals vs. Centaurus Metals Limited | European Metals vs. Artemis Resources | European Metals vs. Ascendant Resources |
| Core Lithium vs. Macmahon Holdings Limited | Core Lithium vs. Prime Meridian Resources | Core Lithium vs. International Lithium Corp | Core Lithium vs. Hudson 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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