Correlation Between American Lithium and M3 Metals
Can any of the company-specific risk be diversified away by investing in both American Lithium and M3 Metals 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 M3 Metals 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 M3 Metals Corp, you can compare the effects of market volatilities on American Lithium and M3 Metals 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 M3 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and M3 Metals.
Diversification Opportunities for American Lithium and M3 Metals
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and MLGCF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and M3 Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Metals Corp 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 M3 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Metals Corp has no effect on the direction of American Lithium i.e., American Lithium and M3 Metals go up and down completely randomly.
Pair Corralation between American Lithium and M3 Metals
Given the investment horizon of 90 days American Lithium Corp is expected to generate 1.55 times more return on investment than M3 Metals. However, American Lithium is 1.55 times more volatile than M3 Metals Corp. It trades about -0.04 of its potential returns per unit of risk. M3 Metals Corp is currently generating about -0.21 per unit of risk. If you would invest 66.00 in American Lithium Corp on September 12, 2024 and sell it today you would lose (3.00) from holding American Lithium Corp or give up 4.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
American Lithium Corp vs. M3 Metals Corp
Performance |
| Timeline |
| American Lithium Corp |
| M3 Metals Corp |
American Lithium and M3 Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and M3 Metals
The main advantage of trading using opposite American Lithium and M3 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, M3 Metals 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 M3 Metals will offset losses from the drop in M3 Metals' long position.| American Lithium vs. AKITA Drilling | American Lithium vs. KeyCorp | American Lithium vs. Mill City Ventures | American Lithium vs. Red Branch Technologies |
| M3 Metals vs. Qubec Nickel Corp | M3 Metals vs. IGO Limited | M3 Metals vs. Focus Graphite | M3 Metals vs. Mineral Res |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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