Correlation Between IONQ and ACME Lithium
Can any of the company-specific risk be diversified away by investing in both IONQ and ACME 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 IONQ and ACME Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IONQ Inc and ACME Lithium, you can compare the effects of market volatilities on IONQ and ACME 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 IONQ with a short position of ACME Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of IONQ and ACME Lithium.
Diversification Opportunities for IONQ and ACME Lithium
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IONQ and ACME is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and ACME Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACME Lithium and IONQ 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 IONQ Inc are associated (or correlated) with ACME Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACME Lithium has no effect on the direction of IONQ i.e., IONQ and ACME Lithium go up and down completely randomly.
Pair Corralation between IONQ and ACME Lithium
Given the investment horizon of 90 days IONQ Inc is expected to generate 0.72 times more return on investment than ACME Lithium. However, IONQ Inc is 1.39 times less risky than ACME Lithium. It trades about 0.47 of its potential returns per unit of risk. ACME Lithium is currently generating about -0.08 per unit of risk. If you would invest 1,503 in IONQ Inc on September 1, 2024 and sell it today you would earn a total of 2,147 from holding IONQ Inc or generate 142.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IONQ Inc vs. ACME Lithium
Performance |
| Timeline |
| IONQ Inc |
| ACME Lithium |
IONQ and ACME Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IONQ and ACME Lithium
The main advantage of trading using opposite IONQ and ACME Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IONQ position performs unexpectedly, ACME 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 ACME Lithium will offset losses from the drop in ACME Lithium's long position.The idea behind IONQ Inc and ACME Lithium 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.| ACME Lithium vs. ATT Inc | ACME Lithium vs. Merck Company | ACME Lithium vs. Walt Disney | ACME Lithium vs. Caterpillar |
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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