Correlation Between Laurentian Bank and American Lithium
Can any of the company-specific risk be diversified away by investing in both Laurentian Bank 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 Laurentian Bank and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laurentian Bank and American Lithium Corp, you can compare the effects of market volatilities on Laurentian Bank 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 Laurentian Bank with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and American Lithium.
Diversification Opportunities for Laurentian Bank and American Lithium
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Laurentian and American is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank 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 Laurentian Bank 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 Laurentian Bank 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 Laurentian Bank i.e., Laurentian Bank and American Lithium go up and down completely randomly.
Pair Corralation between Laurentian Bank and American Lithium
Assuming the 90 days horizon Laurentian Bank is expected to generate 0.16 times more return on investment than American Lithium. However, Laurentian Bank is 6.14 times less risky than American Lithium. It trades about -0.22 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.12 per unit of risk. If you would invest 2,867 in Laurentian Bank on November 27, 2024 and sell it today you would lose (112.00) from holding Laurentian Bank or give up 3.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laurentian Bank vs. American Lithium Corp
Performance |
| Timeline |
| Laurentian Bank |
| American Lithium Corp |
Laurentian Bank and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laurentian Bank and American Lithium
The main advantage of trading using opposite Laurentian Bank and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank 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.| Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco | Laurentian Bank vs. Power |
| American Lithium vs. Cogeco Communications | American Lithium vs. Westshore Terminals Investment | American Lithium vs. Economic Investment Trust | American Lithium vs. Maple Peak Investments |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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