Correlation Between American Lithium and Peel Mining
Can any of the company-specific risk be diversified away by investing in both American Lithium and Peel Mining 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 Peel Mining 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 Peel Mining Limited, you can compare the effects of market volatilities on American Lithium and Peel Mining 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 Peel Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Peel Mining.
Diversification Opportunities for American Lithium and Peel Mining
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Peel is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Peel Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining Limited 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining Limited has no effect on the direction of American Lithium i.e., American Lithium and Peel Mining go up and down completely randomly.
Pair Corralation between American Lithium and Peel Mining
Assuming the 90 days trading horizon American Lithium Corp is expected to generate 1.17 times more return on investment than Peel Mining. However, American Lithium is 1.17 times more volatile than Peel Mining Limited. It trades about 0.03 of its potential returns per unit of risk. Peel Mining Limited is currently generating about 0.02 per unit of risk. If you would invest 62.00 in American Lithium Corp on September 5, 2024 and sell it today you would lose (1.00) from holding American Lithium Corp or give up 1.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.22% |
| Values | Daily Returns |
American Lithium Corp vs. Peel Mining Limited
Performance |
| Timeline |
| American Lithium Corp |
| Peel Mining Limited |
American Lithium and Peel Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Peel Mining
The main advantage of trading using opposite American Lithium and Peel Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Peel Mining 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 Peel Mining will offset losses from the drop in Peel Mining's long position.| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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