Correlation Between CleanTech Lithium and EasyJet PLC

Can any of the company-specific risk be diversified away by investing in both CleanTech Lithium and EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC, you can compare the effects of market volatilities on CleanTech Lithium and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CleanTech Lithium and EasyJet PLC.

Diversification Opportunities for CleanTech Lithium and EasyJet PLC

0.49

Correlation Coefficient

CleanTech Lithium  EasyJet PLC

Very weak diversification

The 3 months correlation between CleanTech and EasyJet is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CleanTech Lithium plc and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of CleanTech Lithium i.e., CleanTech Lithium and EasyJet PLC go up and down completely randomly.

Pair Corralation between CleanTech Lithium and EasyJet PLC

Assuming the 90 days trading horizon CleanTech Lithium plc is expected to under-perform the EasyJet PLC. In addition to that, CleanTech Lithium is 2.15 times more volatile than EasyJet PLC. It trades about -0.18 of its total potential returns per unit of risk. EasyJet PLC is currently generating about -0.1 per unit of volatility. If you would invest  54,969  in EasyJet PLC on December 25, 2024 and sell it today you would lose (6,519) from holding EasyJet PLC or give up 11.86% of portfolio value over 90 days.

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

CleanTech Lithium plc  vs.  EasyJet PLC

CleanTech Lithium plc

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

EasyJet PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days EasyJet PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CleanTech Lithium and EasyJet PLC

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

The idea behind CleanTech Lithium plc and EasyJet PLC 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.