Correlation Between American Lithium and Broadcom
Can any of the company-specific risk be diversified away by investing in both American Lithium and Broadcom 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 American Lithium and Broadcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Lithium Corp and Broadcom, you can compare the effects of market volatilities on American Lithium and Broadcom 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 American Lithium with a short position of Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Broadcom.
Diversification Opportunities for American Lithium and Broadcom
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Broadcom is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom and American 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 American Lithium Corp are associated (or correlated) with Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of American Lithium i.e., American Lithium and Broadcom go up and down completely randomly.
Pair Corralation between American Lithium and Broadcom
Given the investment horizon of 90 days American Lithium Corp is expected to generate 3.79 times more return on investment than Broadcom. However, American Lithium is 3.79 times more volatile than Broadcom. It trades about 0.11 of its potential returns per unit of risk. Broadcom is currently generating about -0.05 per unit of risk. If you would invest 74.00 in American Lithium Corp on August 29, 2024 and sell it today you would earn a total of 18.00 from holding American Lithium Corp or generate 24.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Broadcom
Performance |
| Timeline |
| American Lithium Corp |
| Broadcom |
American Lithium and Broadcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Broadcom
The main advantage of trading using opposite American Lithium and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Broadcom 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 Broadcom will offset losses from the drop in Broadcom's long position.| American Lithium vs. Cogeco Communications | American Lithium vs. NeXGold Mining Corp | American Lithium vs. iA Financial | American Lithium vs. Laurentian Bank |
| Broadcom vs. NVIDIA CDR | Broadcom vs. Advanced Micro Devices | Broadcom vs. POET Technologies | Broadcom vs. Quantum Numbers |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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