Correlation Between American Lithium and Pure Energy
Can any of the company-specific risk be diversified away by investing in both American Lithium and Pure Energy 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 Pure Energy 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 Pure Energy Minerals, you can compare the effects of market volatilities on American Lithium and Pure Energy 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 Pure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Pure Energy.
Diversification Opportunities for American Lithium and Pure Energy
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Pure is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals 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 Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of American Lithium i.e., American Lithium and Pure Energy go up and down completely randomly.
Pair Corralation between American Lithium and Pure Energy
Given the investment horizon of 90 days American Lithium Corp is expected to generate 0.76 times more return on investment than Pure Energy. However, American Lithium Corp is 1.32 times less risky than Pure Energy. It trades about 0.02 of its potential returns per unit of risk. Pure Energy Minerals is currently generating about -0.01 per unit of risk. If you would invest 96.00 in American Lithium Corp on September 3, 2024 and sell it today you would earn a total of 0.00 from holding American Lithium Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Pure Energy Minerals
Performance |
| Timeline |
| American Lithium Corp |
| Pure Energy Minerals |
American Lithium and Pure Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Pure Energy
The main advantage of trading using opposite American Lithium and Pure Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Pure Energy 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 Pure Energy will offset losses from the drop in Pure Energy's long position.| American Lithium vs. Brookfield Office Properties | American Lithium vs. Rogers Communications | American Lithium vs. Plaza Retail REIT | American Lithium vs. WELL Health Technologies |
| Pure Energy vs. Algoma Steel Group | Pure Energy vs. Champion Iron | Pure Energy vs. International Zeolite Corp | Pure Energy vs. European Residential Real |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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