Correlation Between Canadian Palladium and Ameriwest Lithium
Can any of the company-specific risk be diversified away by investing in both Canadian Palladium and Ameriwest 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 Canadian Palladium and Ameriwest Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Palladium Resources and Ameriwest Lithium, you can compare the effects of market volatilities on Canadian Palladium and Ameriwest 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 Canadian Palladium with a short position of Ameriwest Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Palladium and Ameriwest Lithium.
Diversification Opportunities for Canadian Palladium and Ameriwest Lithium
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Canadian and Ameriwest is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Palladium Resources and Ameriwest Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriwest Lithium and Canadian Palladium 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 Canadian Palladium Resources are associated (or correlated) with Ameriwest Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriwest Lithium has no effect on the direction of Canadian Palladium i.e., Canadian Palladium and Ameriwest Lithium go up and down completely randomly.
Pair Corralation between Canadian Palladium and Ameriwest Lithium
Assuming the 90 days horizon Canadian Palladium is expected to generate 3.9 times less return on investment than Ameriwest Lithium. But when comparing it to its historical volatility, Canadian Palladium Resources is 1.4 times less risky than Ameriwest Lithium. It trades about 0.09 of its potential returns per unit of risk. Ameriwest Lithium is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6.60 in Ameriwest Lithium on November 27, 2024 and sell it today you would earn a total of 5.40 from holding Ameriwest Lithium or generate 81.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Palladium Resources vs. Ameriwest Lithium
Performance |
| Timeline |
| Canadian Palladium |
| Ameriwest Lithium |
Canadian Palladium and Ameriwest Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Palladium and Ameriwest Lithium
The main advantage of trading using opposite Canadian Palladium and Ameriwest Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Palladium position performs unexpectedly, Ameriwest 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 Ameriwest Lithium will offset losses from the drop in Ameriwest Lithium's long position.| Canadian Palladium vs. Aurelia Metals Limited | Canadian Palladium vs. Artemis Resources | Canadian Palladium vs. Azimut Exploration | Canadian Palladium vs. Champion Bear Resources |
| Ameriwest Lithium vs. Starr Peak Exploration | Ameriwest Lithium vs. Global Helium Corp | Ameriwest Lithium vs. Alpha Lithium | Ameriwest Lithium vs. United Lithium Corp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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