Correlation Between Core Lithium and Readytech Holdings

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

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

Diversification Opportunities for Core Lithium and Readytech Holdings

-0.55

Correlation Coefficient

Core Lithium  Readytech Holdings

Excellent diversification

The 3 months correlation between Core and Readytech is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Readytech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Readytech Holdings 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 Readytech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Readytech Holdings has no effect on the direction of Core Lithium i.e., Core Lithium and Readytech Holdings go up and down completely randomly.

Pair Corralation between Core Lithium and Readytech Holdings

Assuming the 90 days trading horizon Core Lithium is expected to generate 16.42 times less return on investment than Readytech Holdings. In addition to that, Core Lithium is 1.49 times more volatile than Readytech Holdings. It trades about 0.01 of its total potential returns per unit of risk. Readytech Holdings is currently generating about 0.28 per unit of volatility. If you would invest  293.00  in Readytech Holdings on October 11, 2024 and sell it today you would earn a total of  26.00  from holding Readytech Holdings or generate 8.87% return on investment over 90 days.

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

Core Lithium  vs.  Readytech Holdings

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Readytech Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Readytech Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Readytech Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Core Lithium and Readytech Holdings

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

The idea behind Core Lithium and Readytech Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.