Correlation Between Core Lithium and Carlton Investments

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

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

Diversification Opportunities for Core Lithium and Carlton Investments

-0.69

Correlation Coefficient

Core Lithium  Carlton Investments

Excellent diversification

The 3 months correlation between Core and Carlton is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Carlton Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlton Investments and Core 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 Core Lithium are associated (or correlated) with Carlton Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlton Investments has no effect on the direction of Core Lithium i.e., Core Lithium and Carlton Investments go up and down completely randomly.

Pair Corralation between Core Lithium and Carlton Investments

Assuming the 90 days trading horizon Core Lithium is expected to under-perform the Carlton Investments. In addition to that, Core Lithium is 2.26 times more volatile than Carlton Investments. It trades about -0.13 of its total potential returns per unit of risk. Carlton Investments is currently generating about 0.04 per unit of volatility. If you would invest  3,070  in Carlton Investments on September 30, 2024 and sell it today you would earn a total of  18.00  from holding Carlton Investments or generate 0.59% return on investment over 90 days.

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

Core Lithium  vs.  Carlton Investments

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Carlton Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carlton Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carlton Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Core Lithium and Carlton Investments

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

The idea behind Core Lithium and Carlton Investments 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.