Correlation Between Power Metals and Core Lithium

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

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

Diversification Opportunities for Power Metals and Core Lithium

-0.2

Correlation Coefficient

Power Metals  Core Lithium

Good diversification

The 3 months correlation between Power and Core is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Power Metals Corp and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Power Metals 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 Power Metals Corp 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 has no effect on the direction of Power Metals i.e., Power Metals and Core Lithium go up and down completely randomly.

Pair Corralation between Power Metals and Core Lithium

Assuming the 90 days horizon Power Metals Corp is expected to under-perform the Core Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Power Metals Corp is 1.31 times less risky than Core Lithium. The stock trades about 0.0 of its potential returns per unit of risk. The Core Lithium is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6.24  in Core Lithium on May 19, 2025 and sell it today you would earn a total of  0.26  from holding Core Lithium or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Power Metals Corp  vs.  Core Lithium

Power Metals Corp

Risk-Adjusted Performance

Weakest

Over the last 90 days Power Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power Metals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Core Lithium

Risk-Adjusted Performance

Soft

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.

Pair Trading with Power Metals and Core Lithium

The main advantage of trading using opposite Power Metals and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metals 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 Power Metals Corp and Core Lithium 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.