Correlation Between American Lithium and Cogeco Communications
Can any of the company-specific risk be diversified away by investing in both American Lithium and Cogeco Communications 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 Cogeco Communications 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 Cogeco Communications, you can compare the effects of market volatilities on American Lithium and Cogeco Communications 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 Cogeco Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Cogeco Communications.
Diversification Opportunities for American Lithium and Cogeco Communications
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Cogeco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications 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 Cogeco Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Communications has no effect on the direction of American Lithium i.e., American Lithium and Cogeco Communications go up and down completely randomly.
Pair Corralation between American Lithium and Cogeco Communications
Given the investment horizon of 90 days American Lithium Corp is expected to under-perform the Cogeco Communications. In addition to that, American Lithium is 4.42 times more volatile than Cogeco Communications. It trades about -0.18 of its total potential returns per unit of risk. Cogeco Communications is currently generating about -0.17 per unit of volatility. If you would invest 6,965 in Cogeco Communications on August 29, 2024 and sell it today you would lose (264.00) from holding Cogeco Communications or give up 3.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Cogeco Communications
Performance |
| Timeline |
| American Lithium Corp |
| Cogeco Communications |
American Lithium and Cogeco Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Cogeco Communications
The main advantage of trading using opposite American Lithium and Cogeco Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Cogeco Communications 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 Cogeco Communications will offset losses from the drop in Cogeco Communications' long position.| American Lithium vs. Cogeco Communications | American Lithium vs. NeXGold Mining Corp | American Lithium vs. iA Financial | American Lithium vs. Laurentian Bank |
| Cogeco Communications vs. Cogeco Inc | Cogeco Communications vs. Quebecor | Cogeco Communications vs. Transcontinental | Cogeco Communications vs. Stella Jones |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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