Correlation Between Lithium Americas and American Lithium
Can any of the company-specific risk be diversified away by investing in both Lithium Americas 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 Lithium Americas and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Americas Corp and American Lithium Corp, you can compare the effects of market volatilities on Lithium Americas 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 Lithium Americas with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Americas and American Lithium.
Diversification Opportunities for Lithium Americas and American Lithium
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithium and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp 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 Lithium Americas 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 Lithium Americas Corp 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 Lithium Americas i.e., Lithium Americas and American Lithium go up and down completely randomly.
Pair Corralation between Lithium Americas and American Lithium
Considering the 90-day investment horizon Lithium Americas Corp is expected to generate 0.96 times more return on investment than American Lithium. However, Lithium Americas Corp is 1.05 times less risky than American Lithium. It trades about -0.03 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.11 per unit of risk. If you would invest 411.00 in Lithium Americas Corp on August 31, 2024 and sell it today you would lose (16.00) from holding Lithium Americas Corp or give up 3.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Americas Corp vs. American Lithium Corp
Performance |
| Timeline |
| Lithium Americas Corp |
| American Lithium Corp |
Lithium Americas and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Americas and American Lithium
The main advantage of trading using opposite Lithium Americas and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas 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.| Lithium Americas vs. Piedmont Lithium Ltd | Lithium Americas vs. Standard Lithium | Lithium Americas vs. Vale SA ADR | Lithium Americas vs. BHP Group Limited |
| American Lithium vs. Olympic Steel | American Lithium vs. Kaiser Aluminum | American Lithium vs. Diageo PLC ADR | American Lithium vs. Century Aluminum |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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