Correlation Between Energy Technologies and Galan Lithium

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

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

Diversification Opportunities for Energy Technologies and Galan Lithium

0.43

Correlation Coefficient

Energy Technologies  Galan Lithium

Very weak diversification

The 3 months correlation between Energy and Galan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Energy Technologies Limited and Galan Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galan Lithium and Energy Technologies 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 Energy Technologies Limited are associated (or correlated) with Galan Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galan Lithium has no effect on the direction of Energy Technologies i.e., Energy Technologies and Galan Lithium go up and down completely randomly.

Pair Corralation between Energy Technologies and Galan Lithium

Assuming the 90 days trading horizon Energy Technologies Limited is expected to generate 0.63 times more return on investment than Galan Lithium. However, Energy Technologies Limited is 1.6 times less risky than Galan Lithium. It trades about 0.03 of its potential returns per unit of risk. Galan Lithium is currently generating about 0.0 per unit of risk. If you would invest  3.10  in Energy Technologies Limited on December 20, 2024 and sell it today you would earn a total of  0.10  from holding Energy Technologies Limited or generate 3.23% return on investment over 90 days.

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

Energy Technologies Limited  vs.  Galan Lithium

Energy Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Technologies Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Energy Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Galan Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galan Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Galan Lithium 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 Energy Technologies and Galan Lithium

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

The idea behind Energy Technologies Limited and Galan Lithium 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.