Correlation Between ThinTech Materials and Advanced Lithium

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

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

Diversification Opportunities for ThinTech Materials and Advanced Lithium

-0.6

Correlation Coefficient

ThinTech Materials  Advanced Lithium

Excellent diversification

The 3 months correlation between ThinTech and Advanced is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ThinTech Materials Technology 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 ThinTech Materials 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 ThinTech Materials Technology 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 ThinTech Materials i.e., ThinTech Materials and Advanced Lithium go up and down completely randomly.

Pair Corralation between ThinTech Materials and Advanced Lithium

Assuming the 90 days trading horizon ThinTech Materials Technology is expected to under-perform the Advanced Lithium. But the stock apears to be less risky and, when comparing its historical volatility, ThinTech Materials Technology is 1.54 times less risky than Advanced Lithium. The stock trades about -0.06 of its potential returns per unit of risk. The Advanced Lithium Electrochemistry is currently generating about 0.12 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  955.00  from holding Advanced Lithium Electrochemistry or generate 29.07% return on investment over 90 days.

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

ThinTech Materials Technology  vs.  Advanced Lithium Electrochemis

ThinTech Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThinTech Materials Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Advanced Lithium Ele

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Lithium Electrochemistry are ranked lower than 9 (%) 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 ThinTech Materials and Advanced Lithium

The main advantage of trading using opposite ThinTech Materials and Advanced Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ThinTech Materials 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 ThinTech Materials Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.