Correlation Between Lithium Energi and Apple

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

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

Diversification Opportunities for Lithium Energi and Apple

-0.64

Correlation Coefficient

Lithium Energi  Apple

Excellent diversification

The 3 months correlation between Lithium and Apple is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Energi Exploration and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and Lithium Energi 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 Lithium Energi Exploration are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc CDR has no effect on the direction of Lithium Energi i.e., Lithium Energi and Apple go up and down completely randomly.

Pair Corralation between Lithium Energi and Apple

Assuming the 90 days trading horizon Lithium Energi Exploration is expected to generate 14.63 times more return on investment than Apple. However, Lithium Energi is 14.63 times more volatile than Apple Inc CDR. It trades about 0.02 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.21 per unit of risk. If you would invest  4.00  in Lithium Energi Exploration on October 6, 2024 and sell it today you would lose (1.00) from holding Lithium Energi Exploration or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Lithium Energi Exploration  vs.  Apple Inc CDR

Lithium Energi Explo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Energi Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Apple Inc CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lithium Energi and Apple

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

The idea behind Lithium Energi Exploration and Apple Inc CDR 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.