Correlation Between EP Financial and Delta Lithium

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

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

Diversification Opportunities for EP Financial and Delta Lithium

-0.18

Correlation Coefficient

EP Financial  Delta Lithium

Good diversification

The 3 months correlation between EP1 and Delta is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Delta Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Lithium and EP Financial 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 EP Financial Group are associated (or correlated) with Delta Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Lithium has no effect on the direction of EP Financial i.e., EP Financial and Delta Lithium go up and down completely randomly.

Pair Corralation between EP Financial and Delta Lithium

Assuming the 90 days trading horizon EP Financial Group is expected to generate 0.49 times more return on investment than Delta Lithium. However, EP Financial Group is 2.03 times less risky than Delta Lithium. It trades about -0.03 of its potential returns per unit of risk. Delta Lithium is currently generating about -0.19 per unit of risk. If you would invest  50.00  in EP Financial Group on September 18, 2024 and sell it today you would lose (1.00) from holding EP Financial Group or give up 2.0% of portfolio value over 90 days.

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

EP Financial Group  vs.  Delta Lithium

EP Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EP Financial and Delta Lithium

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

The idea behind EP Financial Group and Delta 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.