Correlation Between American Lithium and Stepan
Can any of the company-specific risk be diversified away by investing in both American Lithium and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on American Lithium and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Stepan.
Diversification Opportunities for American Lithium and Stepan
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Stepan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of American Lithium i.e., American Lithium and Stepan go up and down completely randomly.
Pair Corralation between American Lithium and Stepan
Given the investment horizon of 90 days American Lithium Corp is expected to under-perform the Stepan. In addition to that, American Lithium is 3.75 times more volatile than Stepan Company. It trades about -0.27 of its total potential returns per unit of risk. Stepan Company is currently generating about 0.03 per unit of volatility. If you would invest 7,450 in Stepan Company on September 13, 2024 and sell it today you would earn a total of 100.00 from holding Stepan Company or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Stepan Company
Performance |
| Timeline |
| American Lithium Corp |
| Stepan Company |
American Lithium and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Stepan
The main advantage of trading using opposite American Lithium and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| American Lithium vs. Stepan Company | American Lithium vs. East Africa Metals | American Lithium vs. Eastman Chemical | American Lithium vs. Eldorado Gold Corp |
| Stepan vs. LyondellBasell Industries NV | Stepan vs. International Flavors Fragrances | Stepan vs. Cabot | Stepan vs. Westlake Chemical |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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