Correlation Between Core Lithium and CanAlaska Uranium

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

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

Diversification Opportunities for Core Lithium and CanAlaska Uranium

-0.01

Correlation Coefficient

Core Lithium  CanAlaska Uranium

Good diversification

The 3 months correlation between Core and CanAlaska is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and CanAlaska Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanAlaska Uranium and Core 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 Core Lithium are associated (or correlated) with CanAlaska Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanAlaska Uranium has no effect on the direction of Core Lithium i.e., Core Lithium and CanAlaska Uranium go up and down completely randomly.

Pair Corralation between Core Lithium and CanAlaska Uranium

Assuming the 90 days horizon Core Lithium is expected to generate 4.25 times more return on investment than CanAlaska Uranium. However, Core Lithium is 4.25 times more volatile than CanAlaska Uranium. It trades about 0.05 of its potential returns per unit of risk. CanAlaska Uranium is currently generating about -0.04 per unit of risk. If you would invest  6.00  in Core Lithium on September 26, 2024 and sell it today you would lose (0.87) from holding Core Lithium or give up 14.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Core Lithium  vs.  CanAlaska Uranium

Core Lithium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Core Lithium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Core Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

CanAlaska Uranium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CanAlaska Uranium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with Core Lithium and CanAlaska Uranium

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

The idea behind Core Lithium and CanAlaska Uranium 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.