Correlation Between Industrias Penoles and Core Lithium

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

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

Diversification Opportunities for Industrias Penoles and Core Lithium

0.47

Correlation Coefficient

Industrias Penoles  Core Lithium

Very weak diversification

The 3 months correlation between Industrias and Core is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Penoles Sab and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Industrias Penoles 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 Industrias Penoles Sab are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Industrias Penoles i.e., Industrias Penoles and Core Lithium go up and down completely randomly.

Pair Corralation between Industrias Penoles and Core Lithium

Assuming the 90 days horizon Industrias Penoles Sab is expected to generate 0.8 times more return on investment than Core Lithium. However, Industrias Penoles Sab is 1.25 times less risky than Core Lithium. It trades about -0.11 of its potential returns per unit of risk. Core Lithium is currently generating about -0.14 per unit of risk. If you would invest  1,590  in Industrias Penoles Sab on September 2, 2024 and sell it today you would lose (280.00) from holding Industrias Penoles Sab or give up 17.61% of portfolio value over 90 days.

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

Industrias Penoles Sab  vs.  Core Lithium

Industrias Penoles Sab

Risk-Adjusted Performance

4 of 100

Insignificant

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

Core Lithium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Core Lithium are ranked lower than 5 (%) 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.

Pair Trading with Industrias Penoles and Core Lithium

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

The idea behind Industrias Penoles Sab and Core 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.