Correlation Between Ameriwest Lithium and Global Helium
Can any of the company-specific risk be diversified away by investing in both Ameriwest Lithium and Global Helium 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 Global Helium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriwest Lithium and Global Helium Corp, you can compare the effects of market volatilities on Ameriwest Lithium and Global Helium 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 Global Helium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriwest Lithium and Global Helium.
Diversification Opportunities for Ameriwest Lithium and Global Helium
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ameriwest and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ameriwest Lithium and Global Helium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Helium 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 Global Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Helium Corp has no effect on the direction of Ameriwest Lithium i.e., Ameriwest Lithium and Global Helium go up and down completely randomly.
Pair Corralation between Ameriwest Lithium and Global Helium
Assuming the 90 days horizon Ameriwest Lithium is expected to under-perform the Global Helium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ameriwest Lithium is 1.43 times less risky than Global Helium. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Global Helium Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Global Helium Corp on August 29, 2024 and sell it today you would lose (16.75) from holding Global Helium Corp or give up 83.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameriwest Lithium vs. Global Helium Corp
Performance |
| Timeline |
| Ameriwest Lithium |
| Global Helium Corp |
Ameriwest Lithium and Global Helium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameriwest Lithium and Global Helium
The main advantage of trading using opposite Ameriwest Lithium and Global Helium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriwest Lithium position performs unexpectedly, Global Helium 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 Global Helium will offset losses from the drop in Global Helium's long position.The idea behind Ameriwest Lithium and Global Helium 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.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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