Correlation Between Standard Lithium and Materion

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

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

Diversification Opportunities for Standard Lithium and Materion

0.22

Correlation Coefficient

Standard Lithium  Materion

Modest diversification

The 3 months correlation between Standard and Materion is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium and Materion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materion and Standard 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 Standard Lithium are associated (or correlated) with Materion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materion has no effect on the direction of Standard Lithium i.e., Standard Lithium and Materion go up and down completely randomly.

Pair Corralation between Standard Lithium and Materion

Considering the 90-day investment horizon Standard Lithium is expected to under-perform the Materion. In addition to that, Standard Lithium is 1.61 times more volatile than Materion. It trades about -0.13 of its total potential returns per unit of risk. Materion is currently generating about -0.19 per unit of volatility. If you would invest  11,781  in Materion on December 1, 2024 and sell it today you would lose (2,645) from holding Materion or give up 22.45% of portfolio value over 90 days.

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

Standard Lithium  vs.  Materion

Standard Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Standard Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Materion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Standard Lithium and Materion

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

The idea behind Standard Lithium and Materion 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..