Correlation Between South32 and Core Lithium
Can any of the company-specific risk be diversified away by investing in both South32 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 South32 and Core Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Core Lithium, you can compare the effects of market volatilities on South32 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 South32 with a short position of Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Core Lithium.
Diversification Opportunities for South32 and Core Lithium
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between South32 and Core is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and South32 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 South32 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 South32 i.e., South32 and Core Lithium go up and down completely randomly.
Pair Corralation between South32 and Core Lithium
Assuming the 90 days horizon South32 Limited is expected to generate 0.3 times more return on investment than Core Lithium. However, South32 Limited is 3.35 times less risky than Core Lithium. It trades about -0.1 of its potential returns per unit of risk. Core Lithium is currently generating about -0.14 per unit of risk. If you would invest 240.00 in South32 Limited on September 1, 2024 and sell it today you would lose (13.00) from holding South32 Limited or give up 5.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 Limited vs. Core Lithium
Performance |
| Timeline |
| South32 Limited |
| Core Lithium |
South32 and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and Core Lithium
The main advantage of trading using opposite South32 and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 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.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| Core Lithium vs. ATT Inc | Core Lithium vs. Merck Company | Core Lithium vs. Walt Disney | Core 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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