Correlation Between American Lithium and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both American Lithium and Frontier 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 American Lithium and Frontier Lithium 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 Frontier Lithium, you can compare the effects of market volatilities on American Lithium and Frontier 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 American Lithium with a short position of Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Frontier Lithium.
Diversification Opportunities for American Lithium and Frontier Lithium
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Frontier is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of American Lithium i.e., American Lithium and Frontier Lithium go up and down completely randomly.
Pair Corralation between American Lithium and Frontier Lithium
Given the investment horizon of 90 days American Lithium Corp is expected to generate 0.9 times more return on investment than Frontier Lithium. However, American Lithium Corp is 1.11 times less risky than Frontier Lithium. It trades about -0.16 of its potential returns per unit of risk. Frontier Lithium is currently generating about -0.15 per unit of risk. If you would invest 81.00 in American Lithium Corp on August 30, 2024 and sell it today you would lose (12.50) from holding American Lithium Corp or give up 15.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Frontier Lithium
Performance |
| Timeline |
| American Lithium Corp |
| Frontier Lithium |
American Lithium and Frontier Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Frontier Lithium
The main advantage of trading using opposite American Lithium and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Frontier 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.| American Lithium vs. Lifevantage | American Lithium vs. Albertsons Companies | American Lithium vs. BBB Foods | American Lithium vs. Natural Alternatives International |
| Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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