Correlation Between American Lithium and Rock Tech
Can any of the company-specific risk be diversified away by investing in both American Lithium and Rock Tech 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 American Lithium and Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Lithium Corp and Rock Tech Lithium, you can compare the effects of market volatilities on American Lithium and Rock Tech 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 American Lithium with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Rock Tech.
Diversification Opportunities for American Lithium and Rock Tech
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Rock is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and American 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 American Lithium Corp are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of American Lithium i.e., American Lithium and Rock Tech go up and down completely randomly.
Pair Corralation between American Lithium and Rock Tech
Assuming the 90 days trading horizon American Lithium Corp is expected to generate 1.37 times more return on investment than Rock Tech. However, American Lithium is 1.37 times more volatile than Rock Tech Lithium. It trades about 0.04 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.0 per unit of risk. If you would invest 64.00 in American Lithium Corp on September 3, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Rock Tech Lithium
Performance |
| Timeline |
| American Lithium Corp |
| Rock Tech Lithium |
American Lithium and Rock Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Rock Tech
The main advantage of trading using opposite American Lithium and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.| American Lithium vs. Standard Lithium | American Lithium vs. BYD Company Limited | American Lithium vs. Rock Tech Lithium |
| Rock Tech vs. Mineral Resources Limited | Rock Tech vs. Liontown Resources Limited | Rock Tech vs. American Lithium Corp | Rock Tech vs. ADRIATIC METALS LS 013355 |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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