Correlation Between Pilbara Minerals and Allkem

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

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

Diversification Opportunities for Pilbara Minerals and Allkem

0.0

Correlation Coefficient

Pilbara Minerals  Allkem

Pay attention - limited upside

The 3 months correlation between Pilbara and Allkem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem and Pilbara Minerals 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 Pilbara Minerals Limited are associated (or correlated) with Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of Pilbara Minerals i.e., Pilbara Minerals and Allkem go up and down completely randomly.

Pair Corralation between Pilbara Minerals and Allkem

If you would invest (100.00) in Allkem on December 22, 2024 and sell it today you would earn a total of  100.00  from holding Allkem or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Pilbara Minerals Limited  vs.  Allkem

Pilbara Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Pilbara Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Allkem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pilbara Minerals and Allkem

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

The idea behind Pilbara Minerals Limited and Allkem 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.