Correlation Between Pilbara Minerals and Core Lithium
Can any of the company-specific risk be diversified away by investing in both Pilbara Minerals 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 Pilbara Minerals and Core Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pilbara Minerals Limited and Core Lithium, you can compare the effects of market volatilities on Pilbara Minerals 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 Pilbara Minerals with a short position of Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilbara Minerals and Core Lithium.
Diversification Opportunities for Pilbara Minerals and Core Lithium
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pilbara and Core is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Pilbara Minerals 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 Pilbara Minerals Limited 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 Pilbara Minerals i.e., Pilbara Minerals and Core Lithium go up and down completely randomly.
Pair Corralation between Pilbara Minerals and Core Lithium
Assuming the 90 days horizon Pilbara Minerals Limited is expected to generate 0.4 times more return on investment than Core Lithium. However, Pilbara Minerals Limited is 2.47 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 per unit of risk. If you would invest 254.00 in Pilbara Minerals Limited on August 31, 2024 and sell it today you would lose (94.00) from holding Pilbara Minerals Limited or give up 37.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pilbara Minerals Limited vs. Core Lithium
Performance |
| Timeline |
| Pilbara Minerals |
| Core Lithium |
Pilbara Minerals and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pilbara Minerals and Core Lithium
The main advantage of trading using opposite Pilbara Minerals and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilbara Minerals 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.| Pilbara Minerals vs. South32 Limited | Pilbara Minerals vs. Grupo Mxico SAB | Pilbara Minerals vs. Critical Elements | Pilbara Minerals vs. Jourdan Resources |
| Core Lithium vs. Liontown Resources Limited | Core Lithium vs. ATT Inc | Core Lithium vs. Merck Company | Core Lithium vs. Walt Disney |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |