Correlation Between Delta Lithium and Catalyst Metals

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

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

Diversification Opportunities for Delta Lithium and Catalyst Metals

0.51

Correlation Coefficient

Delta Lithium  Catalyst Metals

Very weak diversification

The 3 months correlation between Delta and Catalyst is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Delta Lithium and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals and Delta 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 Delta Lithium are associated (or correlated) with Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Delta Lithium i.e., Delta Lithium and Catalyst Metals go up and down completely randomly.

Pair Corralation between Delta Lithium and Catalyst Metals

Assuming the 90 days trading horizon Delta Lithium is expected to under-perform the Catalyst Metals. But the stock apears to be less risky and, when comparing its historical volatility, Delta Lithium is 1.15 times less risky than Catalyst Metals. The stock trades about -0.16 of its potential returns per unit of risk. The Catalyst Metals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  319.00  in Catalyst Metals on September 17, 2024 and sell it today you would lose (53.00) from holding Catalyst Metals or give up 16.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Delta Lithium  vs.  Catalyst Metals

Delta Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalyst Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Lithium and Catalyst Metals

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

The idea behind Delta Lithium and Catalyst Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.