Correlation Between Verastem and Core Lithium

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

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

Diversification Opportunities for Verastem and Core Lithium

-0.34

Correlation Coefficient

Verastem  Core Lithium

Very good diversification

The 3 months correlation between Verastem and Core is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Core Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium Corp and Verastem 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 Verastem are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium Corp has no effect on the direction of Verastem i.e., Verastem and Core Lithium go up and down completely randomly.

Pair Corralation between Verastem and Core Lithium

Given the investment horizon of 90 days Verastem is expected to generate 12.31 times less return on investment than Core Lithium. In addition to that, Verastem is 3.56 times more volatile than Core Lithium Corp. It trades about 0.01 of its total potential returns per unit of risk. Core Lithium Corp is currently generating about 0.45 per unit of volatility. If you would invest  1,500  in Core Lithium Corp on September 14, 2024 and sell it today you would earn a total of  102.00  from holding Core Lithium Corp or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.21%
Values	Daily Returns

Verastem  vs.  Core Lithium Corp

Verastem

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.

Core Lithium Corp

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Core Lithium Corp are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Core Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verastem and Core Lithium

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

The idea behind Verastem and Core Lithium 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.