Correlation Between Critical Elements and Green Technology

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

By analyzing existing cross correlation between Critical Elements and Green Technology Metals, you can compare the effects of market volatilities on Critical Elements and Green Technology 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 Critical Elements with a short position of Green Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Green Technology.

Diversification Opportunities for Critical Elements and Green Technology

-0.25

Correlation Coefficient

Critical Elements  Green Technology

Very good diversification

The 3 months correlation between Critical and Green is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Green Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Technology Metals and Critical Elements 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 Critical Elements are associated (or correlated) with Green Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Technology Metals has no effect on the direction of Critical Elements i.e., Critical Elements and Green Technology go up and down completely randomly.

Pair Corralation between Critical Elements and Green Technology

Assuming the 90 days horizon Critical Elements is expected to generate 13.89 times less return on investment than Green Technology. But when comparing it to its historical volatility, Critical Elements is 6.37 times less risky than Green Technology. It trades about 0.04 of its potential returns per unit of risk. Green Technology Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.60  in Green Technology Metals on September 3, 2024 and sell it today you would earn a total of  0.21  from holding Green Technology Metals or generate 4.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Critical Elements  vs.  Green Technology Metals

Critical Elements

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Critical Elements may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Green Technology Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Green Technology Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Green Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Elements and Green Technology

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

The idea behind Critical Elements and Green Technology Metals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.