Correlation Between American Lithium and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both American Lithium and Standard 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 American Lithium and Standard Lithium 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 Standard Lithium, you can compare the effects of market volatilities on American Lithium and Standard 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 American Lithium with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Standard Lithium.
Diversification Opportunities for American Lithium and Standard Lithium
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Standard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of American Lithium i.e., American Lithium and Standard Lithium go up and down completely randomly.
Pair Corralation between American Lithium and Standard Lithium
Given the investment horizon of 90 days American Lithium Corp is expected to generate 0.86 times more return on investment than Standard Lithium. However, American Lithium Corp is 1.16 times less risky than Standard Lithium. It trades about -0.19 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.26 per unit of risk. If you would invest 113.00 in American Lithium Corp on August 29, 2024 and sell it today you would lose (21.00) from holding American Lithium Corp or give up 18.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Lithium Corp vs. Standard Lithium
Performance |
| Timeline |
| American Lithium Corp |
| Standard Lithium |
American Lithium and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Lithium and Standard Lithium
The main advantage of trading using opposite American Lithium and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Standard 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| American Lithium vs. Data Communications Management | American Lithium vs. Rogers Communications | American Lithium vs. Converge Technology Solutions | American Lithium vs. NeXGold Mining Corp |
| Standard Lithium vs. First Majestic Silver | Standard Lithium vs. Ivanhoe Energy | Standard Lithium vs. Orezone Gold Corp | Standard Lithium vs. Faraday Copper Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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