Correlation Between Ameriwest Lithium and American Lithium
Can any of the company-specific risk be diversified away by investing in both Ameriwest Lithium and American 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 Ameriwest Lithium and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriwest Lithium and American Lithium Corp, you can compare the effects of market volatilities on Ameriwest Lithium and American 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 Ameriwest Lithium with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriwest Lithium and American Lithium.
Diversification Opportunities for Ameriwest Lithium and American Lithium
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ameriwest and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ameriwest Lithium and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp and Ameriwest 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 Ameriwest Lithium are associated (or correlated) with American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of Ameriwest Lithium i.e., Ameriwest Lithium and American Lithium go up and down completely randomly.
Pair Corralation between Ameriwest Lithium and American Lithium
Assuming the 90 days horizon Ameriwest Lithium is expected to generate 1.8 times more return on investment than American Lithium. However, Ameriwest Lithium is 1.8 times more volatile than American Lithium Corp. It trades about -0.02 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.19 per unit of risk. If you would invest 12.00 in Ameriwest Lithium on August 27, 2024 and sell it today you would lose (1.00) from holding Ameriwest Lithium or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameriwest Lithium vs. American Lithium Corp
Performance |
| Timeline |
| Ameriwest Lithium |
| American Lithium Corp |
Ameriwest Lithium and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameriwest Lithium and American Lithium
The main advantage of trading using opposite Ameriwest Lithium and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriwest Lithium position performs unexpectedly, American 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 American Lithium will offset losses from the drop in American Lithium's long position.The idea behind Ameriwest Lithium and American Lithium Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Lithium vs. Cedar Realty Trust | American Lithium vs. Lipocine | American Lithium vs. Acm Research | American Lithium vs. Artisan Partners Asset |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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