Correlation Between Synthomer Plc and CleanTech Lithium
Can any of the company-specific risk be diversified away by investing in both Synthomer Plc 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 Synthomer Plc and CleanTech Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Synthomer plc and CleanTech Lithium plc, you can compare the effects of market volatilities on Synthomer Plc 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 Synthomer Plc with a short position of CleanTech Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synthomer Plc and CleanTech Lithium.
Diversification Opportunities for Synthomer Plc and CleanTech Lithium
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Synthomer and CleanTech is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Synthomer plc 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 Synthomer Plc 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 Synthomer plc 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 Synthomer Plc i.e., Synthomer Plc and CleanTech Lithium go up and down completely randomly.
Pair Corralation between Synthomer Plc and CleanTech Lithium
Assuming the 90 days trading horizon Synthomer plc is expected to generate 0.86 times more return on investment than CleanTech Lithium. However, Synthomer plc is 1.16 times less risky than CleanTech Lithium. It trades about 0.06 of its potential returns per unit of risk. CleanTech Lithium plc is currently generating about 0.04 per unit of risk. If you would invest 15,140 in Synthomer plc on November 7, 2024 and sell it today you would earn a total of 520.00 from holding Synthomer plc or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Synthomer plc vs. CleanTech Lithium plc
Performance |
| Timeline |
| Synthomer plc |
| CleanTech Lithium plc |
Synthomer Plc and CleanTech Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Synthomer Plc and CleanTech Lithium
The main advantage of trading using opposite Synthomer Plc and CleanTech Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synthomer Plc 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.| Synthomer Plc vs. CVS Health Corp | Synthomer Plc vs. Eco Animal Health | Synthomer Plc vs. Spirent Communications plc | Synthomer Plc vs. Inspiration Healthcare Group |
| CleanTech Lithium vs. Gaztransport et Technigaz | CleanTech Lithium vs. SBM Offshore NV | CleanTech Lithium vs. Hochschild Mining plc | CleanTech Lithium vs. Eastinco Mining Exploration |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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