Correlation Between P Duke and Advanced Lithium

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

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

Diversification Opportunities for P Duke and Advanced Lithium

-0.52

Correlation Coefficient

P Duke  Advanced Lithium

Excellent diversification

The 3 months correlation between 8109 and Advanced is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding P Duke Technology Co 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 P Duke 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 P Duke Technology Co 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 P Duke i.e., P Duke and Advanced Lithium go up and down completely randomly.

Pair Corralation between P Duke and Advanced Lithium

Assuming the 90 days trading horizon P Duke is expected to generate 127.47 times less return on investment than Advanced Lithium. But when comparing it to its historical volatility, P Duke Technology Co is 50.72 times less risky than Advanced Lithium. It trades about 0.02 of its potential returns per unit of risk. Advanced Lithium Electrochemistry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,353  in Advanced Lithium Electrochemistry on September 23, 2024 and sell it today you would lose (4,448) from holding Advanced Lithium Electrochemistry or give up 53.25% of portfolio value over 90 days.

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

P Duke Technology Co  vs.  Advanced Lithium Electrochemis

P Duke Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days P Duke Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, P Duke is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Advanced Lithium Ele

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Lithium Electrochemistry are ranked lower than 6 (%) 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 P Duke and Advanced Lithium

The main advantage of trading using opposite P Duke and Advanced Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if P Duke 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 P Duke Technology Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.