Correlation Between American Rare and Lithium Ionic
Can any of the company-specific risk be diversified away by investing in both American Rare and Lithium Ionic 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 Rare and Lithium Ionic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Rare Earths and Lithium Ionic Corp, you can compare the effects of market volatilities on American Rare and Lithium Ionic 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 Rare with a short position of Lithium Ionic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Lithium Ionic.
Diversification Opportunities for American Rare and Lithium Ionic
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Lithium is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Lithium Ionic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Ionic Corp and American Rare 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 Rare Earths are associated (or correlated) with Lithium Ionic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Ionic Corp has no effect on the direction of American Rare i.e., American Rare and Lithium Ionic go up and down completely randomly.
Pair Corralation between American Rare and Lithium Ionic
Assuming the 90 days horizon American Rare Earths is expected to generate 1.48 times more return on investment than Lithium Ionic. However, American Rare is 1.48 times more volatile than Lithium Ionic Corp. It trades about 0.07 of its potential returns per unit of risk. Lithium Ionic Corp is currently generating about -0.02 per unit of risk. If you would invest 8.75 in American Rare Earths on August 25, 2024 and sell it today you would earn a total of 9.25 from holding American Rare Earths or generate 105.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Rare Earths vs. Lithium Ionic Corp
Performance |
| Timeline |
| American Rare Earths |
| Lithium Ionic Corp |
American Rare and Lithium Ionic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Rare and Lithium Ionic
The main advantage of trading using opposite American Rare and Lithium Ionic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Lithium Ionic 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 Lithium Ionic will offset losses from the drop in Lithium Ionic's long position.| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
| Lithium Ionic vs. Norra Metals Corp | Lithium Ionic vs. Amarc Resources | Lithium Ionic vs. ZincX Resources Corp | Lithium Ionic vs. Nuinsco Resources Limited |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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