Correlation Between First and CleanTech Lithium
Can any of the company-specific risk be diversified away by investing in both First and CleanTech 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 First and CleanTech Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and CleanTech Lithium plc, you can compare the effects of market volatilities on First and CleanTech 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 First with a short position of CleanTech Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and CleanTech Lithium.
Diversification Opportunities for First and CleanTech Lithium
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and CleanTech is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium plc and First 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 First Class Metals are associated (or correlated) with CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of First i.e., First and CleanTech Lithium go up and down completely randomly.
Pair Corralation between First and CleanTech Lithium
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the CleanTech Lithium. But the stock apears to be less risky and, when comparing its historical volatility, First Class Metals is 1.2 times less risky than CleanTech Lithium. The stock trades about -0.02 of its potential returns per unit of risk. The CleanTech Lithium plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,700 in CleanTech Lithium plc on November 2, 2024 and sell it today you would earn a total of 50.00 from holding CleanTech Lithium plc or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. CleanTech Lithium plc
Performance |
| Timeline |
| First Class Metals |
| CleanTech Lithium plc |
First and CleanTech Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and CleanTech Lithium
The main advantage of trading using opposite First and CleanTech Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First position performs unexpectedly, CleanTech 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 CleanTech Lithium will offset losses from the drop in CleanTech Lithium's long position.The idea behind First Class Metals and CleanTech Lithium plc 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.| CleanTech Lithium vs. Bell Food Group | CleanTech Lithium vs. Ecclesiastical Insurance Office | CleanTech Lithium vs. Zurich Insurance Group | CleanTech Lithium vs. Martin Marietta Materials |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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