Correlation Between Carawine Resources and Core Lithium

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

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

Diversification Opportunities for Carawine Resources and Core Lithium

-0.16

Correlation Coefficient

Carawine Resources  Core Lithium

Good diversification

The 3 months correlation between Carawine and Core is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Carawine Resources i.e., Carawine Resources and Core Lithium go up and down completely randomly.

Pair Corralation between Carawine Resources and Core Lithium

Assuming the 90 days trading horizon Carawine Resources Limited is expected to under-perform the Core Lithium. In addition to that, Carawine Resources is 2.03 times more volatile than Core Lithium. It trades about -0.22 of its total potential returns per unit of risk. Core Lithium is currently generating about -0.38 per unit of volatility. If you would invest  9.50  in Core Lithium on September 26, 2024 and sell it today you would lose (1.30) from holding Core Lithium or give up 13.68% of portfolio value over 90 days.

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

Carawine Resources Limited  vs.  Core Lithium

Carawine Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Core Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Carawine Resources and Core Lithium

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

The idea behind Carawine Resources Limited and Core Lithium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.