Correlation Between Macmahon Holdings and Core Lithium

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

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

Diversification Opportunities for Macmahon Holdings and Core Lithium

0.45

Correlation Coefficient

Macmahon Holdings  Core Lithium

Very weak diversification

The 3 months correlation between Macmahon and Core is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Macmahon Holdings 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 Macmahon Holdings Limited 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 Macmahon Holdings i.e., Macmahon Holdings and Core Lithium go up and down completely randomly.

Pair Corralation between Macmahon Holdings and Core Lithium

Assuming the 90 days horizon Macmahon Holdings is expected to generate 3.85 times less return on investment than Core Lithium. But when comparing it to its historical volatility, Macmahon Holdings Limited is 2.67 times less risky than Core Lithium. It trades about 0.05 of its potential returns per unit of risk. Core Lithium is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5.60  in Core Lithium on September 3, 2024 and sell it today you would earn a total of  0.57  from holding Core Lithium or generate 10.18% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Core Lithium

Macmahon Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Macmahon Holdings 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 Macmahon Holdings and Core Lithium

The main advantage of trading using opposite Macmahon Holdings and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macmahon Holdings 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 Macmahon Holdings Limited 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.