Correlation Between E3 LITHIUM and Apple

Can any of the company-specific risk be diversified away by investing in both E3 LITHIUM 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 E3 LITHIUM and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E3 LITHIUM LTD and Apple Inc, you can compare the effects of market volatilities on E3 LITHIUM 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 E3 LITHIUM with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of E3 LITHIUM and Apple.

Diversification Opportunities for E3 LITHIUM and Apple

-0.57

Correlation Coefficient

E3 LITHIUM  Apple

Excellent diversification

The 3 months correlation between OW3 and Apple is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding E3 LITHIUM LTD and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and E3 LITHIUM 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 E3 LITHIUM LTD 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 has no effect on the direction of E3 LITHIUM i.e., E3 LITHIUM and Apple go up and down completely randomly.

Pair Corralation between E3 LITHIUM and Apple

Assuming the 90 days horizon E3 LITHIUM LTD is expected to generate 7.15 times more return on investment than Apple. However, E3 LITHIUM is 7.15 times more volatile than Apple Inc. It trades about 0.09 of its potential returns per unit of risk. Apple Inc is currently generating about 0.58 per unit of risk. If you would invest  62.00  in E3 LITHIUM LTD on September 17, 2024 and sell it today you would earn a total of  5.00  from holding E3 LITHIUM LTD or generate 8.06% return on investment over 90 days.

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

E3 LITHIUM LTD  vs.  Apple Inc

E3 LITHIUM LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E3 LITHIUM and Apple

The main advantage of trading using opposite E3 LITHIUM and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E3 LITHIUM 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 E3 LITHIUM LTD and Apple Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.