Correlation Between American Lithium and Arizona Lithium
Can any of the company-specific risk be diversified away by investing in both American Lithium and Arizona 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 Arizona 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 Arizona Lithium Limited, you can compare the effects of market volatilities on American Lithium and Arizona 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 Arizona Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Arizona Lithium.
Diversification Opportunities for American Lithium and Arizona Lithium
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Arizona is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Arizona Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona 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 Arizona Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Lithium has no effect on the direction of American Lithium i.e., American Lithium and Arizona Lithium go up and down completely randomly.
Pair Corralation between American Lithium and Arizona Lithium
If you would invest 1.44 in Arizona Lithium Limited on September 1, 2024 and sell it today you would lose (0.27) from holding Arizona Lithium Limited or give up 18.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.37% |
| Values | Daily Returns |
American Lithium Corp vs. Arizona Lithium Limited
Performance |
| Timeline |
| American Lithium Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Arizona Lithium |
American Lithium and Arizona Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Arizona Lithium
The main advantage of trading using opposite American Lithium and Arizona Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Arizona 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 Arizona Lithium will offset losses from the drop in Arizona Lithium's long position.| American Lithium vs. American Lithium Corp | American Lithium vs. Frontier Lithium | American Lithium vs. Cypress Development Corp | American Lithium vs. Rock Tech Lithium |
| Arizona Lithium vs. Bushveld Minerals Limited | Arizona Lithium vs. Aurelia Metals Limited | Arizona Lithium vs. Artemis Resources | Arizona Lithium vs. Ascendant Resources |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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