Correlation Between Core Lithium and Global Health

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

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

Diversification Opportunities for Core Lithium and Global Health

-0.14

Correlation Coefficient

Core Lithium  Global Health

Good diversification

The 3 months correlation between Core and Global is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of Core Lithium i.e., Core Lithium and Global Health go up and down completely randomly.

Pair Corralation between Core Lithium and Global Health

Assuming the 90 days trading horizon Core Lithium is expected to generate 0.93 times more return on investment than Global Health. However, Core Lithium is 1.07 times less risky than Global Health. It trades about -0.05 of its potential returns per unit of risk. Global Health is currently generating about -0.12 per unit of risk. If you would invest  8.80  in Core Lithium on December 5, 2024 and sell it today you would lose (0.30) from holding Core Lithium or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Core Lithium  vs.  Global Health

Core Lithium

Risk-Adjusted Performance

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 comparatively stable basic indicators, Core Lithium is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Global Health 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 Global Health

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

The idea behind Core Lithium and Global Health 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.