Correlation Between Core Lithium and Allkem

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

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

Diversification Opportunities for Core Lithium and Allkem

0.0

Correlation Coefficient

Core Lithium  Allkem

Pay attention - limited upside

The 3 months correlation between Core and Allkem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem 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 Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of Core Lithium i.e., Core Lithium and Allkem go up and down completely randomly.

Pair Corralation between Core Lithium and Allkem

If you would invest  5.00  in Core Lithium on December 29, 2024 and sell it today you would earn a total of  0.01  from holding Core Lithium or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Core Lithium  vs.  Allkem

Core Lithium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Core Lithium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Core Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Allkem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Core Lithium and Allkem

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

The idea behind Core Lithium and Allkem 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.