Correlation Between Adriatic Metals and American Lithium
Can any of the company-specific risk be diversified away by investing in both Adriatic Metals and American 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 Adriatic Metals and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adriatic Metals Plc and American Lithium Corp, you can compare the effects of market volatilities on Adriatic Metals and American 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 Adriatic Metals with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and American Lithium.
Diversification Opportunities for Adriatic Metals and American Lithium
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adriatic and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals Plc and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp and Adriatic 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 Adriatic Metals Plc are associated (or correlated) with American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and American Lithium go up and down completely randomly.
Pair Corralation between Adriatic Metals and American Lithium
Assuming the 90 days horizon Adriatic Metals Plc is expected to under-perform the American Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Adriatic Metals Plc is 1.83 times less risky than American Lithium. The stock trades about 0.0 of its potential returns per unit of risk. The American Lithium Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 62.00 in American Lithium Corp on September 12, 2024 and sell it today you would earn a total of 0.00 from holding American Lithium Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adriatic Metals Plc vs. American Lithium Corp
Performance |
| Timeline |
| Adriatic Metals Plc |
| American Lithium Corp |
Adriatic Metals and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adriatic Metals and American Lithium
The main advantage of trading using opposite Adriatic Metals and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals position performs unexpectedly, American 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 American Lithium will offset losses from the drop in American Lithium's long position.| Adriatic Metals vs. American Lithium Corp | Adriatic Metals vs. ADRIATIC METALS LS 013355 | Adriatic Metals vs. Superior Plus Corp | Adriatic Metals vs. SIVERS SEMICONDUCTORS AB |
| American Lithium vs. Standard Lithium | American Lithium vs. BYD Company Limited | American Lithium vs. Rock Tech Lithium |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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