Correlation Between SPDR SP and Themes Lithium

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

By analyzing existing cross correlation between SPDR SP North and Themes Lithium Battery, you can compare the effects of market volatilities on SPDR SP and Themes 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 SPDR SP with a short position of Themes Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Themes Lithium.

Diversification Opportunities for SPDR SP and Themes Lithium

0.2

Correlation Coefficient

SPDR SP  Themes Lithium

Modest diversification

The 3 months correlation between SPDR and Themes is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP North and Themes Lithium Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Lithium Battery and SPDR SP 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 SPDR SP North are associated (or correlated) with Themes Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Lithium Battery has no effect on the direction of SPDR SP i.e., SPDR SP and Themes Lithium go up and down completely randomly.

Pair Corralation between SPDR SP and Themes Lithium

Given the investment horizon of 90 days SPDR SP North is expected to generate 0.7 times more return on investment than Themes Lithium. However, SPDR SP North is 1.43 times less risky than Themes Lithium. It trades about 0.16 of its potential returns per unit of risk. Themes Lithium Battery is currently generating about -0.02 per unit of risk. If you would invest  5,093  in SPDR SP North on December 27, 2024 and sell it today you would earn a total of  504.00  from holding SPDR SP North or generate 9.9% return on investment over 90 days.

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

SPDR SP North  vs.  Themes Lithium Battery

SPDR SP North

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP North are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Themes Lithium Battery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Themes Lithium Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Themes Lithium is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR SP and Themes Lithium

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

The idea behind SPDR SP North and Themes Lithium Battery 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.