Correlation Between CleanTech Lithium and Beowulf Mining

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

By analyzing existing cross correlation between CleanTech Lithium plc and Beowulf Mining, you can compare the effects of market volatilities on CleanTech Lithium and Beowulf Mining 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 CleanTech Lithium with a short position of Beowulf Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and Beowulf Mining.

Diversification Opportunities for CleanTech Lithium and Beowulf Mining

0.84

Correlation Coefficient

CleanTech Lithium  Beowulf Mining

Very poor diversification

The 3 months correlation between CleanTech and Beowulf is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc and Beowulf Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beowulf Mining and CleanTech Lithium 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 CleanTech Lithium plc are associated (or correlated) with Beowulf Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beowulf Mining has no effect on the direction of CleanTech Lithium i.e., CleanTech Lithium and Beowulf Mining go up and down completely randomly.

Pair Corralation between CleanTech Lithium and Beowulf Mining

Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the Beowulf Mining. In addition to that, CleanTech Lithium is 1.3 times more volatile than Beowulf Mining. It trades about -0.21 of its total potential returns per unit of risk. Beowulf Mining is currently generating about -0.23 per unit of volatility. If you would invest  2,500  in Beowulf Mining on September 19, 2024 and sell it today you would lose (1,000.00) from holding Beowulf Mining or give up 40.0% of portfolio value over 90 days.

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

CleanTech Lithium plc  vs.  Beowulf Mining

CleanTech Lithium plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Beowulf Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CleanTech Lithium and Beowulf Mining

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

The idea behind CleanTech Lithium plc and Beowulf Mining 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..