Correlation Between POWR Lithium and Cypress Development

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

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

Diversification Opportunities for POWR Lithium and Cypress Development

0.41

Correlation Coefficient

POWR Lithium  Cypress Development

Very weak diversification

The 3 months correlation between POWR and Cypress is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding POWR Lithium Corp and Cypress Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cypress Development Corp and POWR 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 POWR Lithium Corp are associated (or correlated) with Cypress Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cypress Development Corp has no effect on the direction of POWR Lithium i.e., POWR Lithium and Cypress Development go up and down completely randomly.

Pair Corralation between POWR Lithium and Cypress Development

Assuming the 90 days horizon POWR Lithium Corp is expected to generate 2.56 times more return on investment than Cypress Development. However, POWR Lithium is 2.56 times more volatile than Cypress Development Corp. It trades about 0.02 of its potential returns per unit of risk. Cypress Development Corp is currently generating about -0.03 per unit of risk. If you would invest  3.40  in POWR Lithium Corp on December 2, 2024 and sell it today you would lose (1.81) from holding POWR Lithium Corp or give up 53.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

POWR Lithium Corp  vs.  Cypress Development Corp

POWR Lithium Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in POWR Lithium Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, POWR Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Cypress Development Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cypress Development Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with POWR Lithium and Cypress Development

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

The idea behind POWR Lithium Corp and Cypress Development Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.