Correlation Between Eva Airways and Advanced Lithium

Can any of the company-specific risk be diversified away by investing in both Eva Airways and Advanced 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 Eva Airways and Advanced Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eva Airways Corp and Advanced Lithium Electrochemistry, you can compare the effects of market volatilities on Eva Airways and Advanced 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 Eva Airways with a short position of Advanced Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eva Airways and Advanced Lithium.

Diversification Opportunities for Eva Airways and Advanced Lithium

0.62

Correlation Coefficient

Eva Airways  Advanced Lithium

Poor diversification

The 3 months correlation between Eva and Advanced is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and Advanced Lithium Electrochemis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Lithium Ele and Eva Airways 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 Eva Airways Corp are associated (or correlated) with Advanced Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Lithium Ele has no effect on the direction of Eva Airways i.e., Eva Airways and Advanced Lithium go up and down completely randomly.

Pair Corralation between Eva Airways and Advanced Lithium

Assuming the 90 days trading horizon Eva Airways is expected to generate 1.12 times less return on investment than Advanced Lithium. But when comparing it to its historical volatility, Eva Airways Corp is 2.58 times less risky than Advanced Lithium. It trades about 0.25 of its potential returns per unit of risk. Advanced Lithium Electrochemistry is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,285  in Advanced Lithium Electrochemistry on October 10, 2024 and sell it today you would earn a total of  870.00  from holding Advanced Lithium Electrochemistry or generate 26.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Eva Airways Corp  vs.  Advanced Lithium Electrochemis

Eva Airways Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eva Airways Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eva Airways showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Lithium Ele

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Lithium Electrochemistry are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eva Airways and Advanced Lithium

The main advantage of trading using opposite Eva Airways and Advanced Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eva Airways position performs unexpectedly, Advanced 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 Advanced Lithium will offset losses from the drop in Advanced Lithium's long position.

The idea behind Eva Airways Corp and Advanced Lithium Electrochemistry 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.