Correlation Between Apple and Lithium Energi

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

By analyzing existing cross correlation between Apple Inc CDR and Lithium Energi Exploration, you can compare the effects of market volatilities on Apple and Lithium Energi 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 Apple with a short position of Lithium Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Lithium Energi.

Diversification Opportunities for Apple and Lithium Energi

0.64

Correlation Coefficient

Apple  Lithium Energi

Poor diversification

The 3 months correlation between Apple and Lithium is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Lithium Energi Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Energi Explo and Apple 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 Apple Inc CDR are associated (or correlated) with Lithium Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Energi Explo has no effect on the direction of Apple i.e., Apple and Lithium Energi go up and down completely randomly.

Pair Corralation between Apple and Lithium Energi

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.19 times more return on investment than Lithium Energi. However, Apple Inc CDR is 5.13 times less risky than Lithium Energi. It trades about -0.15 of its potential returns per unit of risk. Lithium Energi Exploration is currently generating about -0.05 per unit of risk. If you would invest  3,777  in Apple Inc CDR on December 24, 2024 and sell it today you would lose (598.00) from holding Apple Inc CDR or give up 15.83% of portfolio value over 90 days.

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

Apple Inc CDR  vs.  Lithium Energi Exploration

Apple Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lithium Energi Explo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Energi Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Apple and Lithium Energi

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

The idea behind Apple Inc CDR and Lithium Energi Exploration 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.