Correlation Between Lithium Ionic and American Rare
Can any of the company-specific risk be diversified away by investing in both Lithium Ionic and American Rare 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 Lithium Ionic and American Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithium Ionic Corp and American Rare Earths, you can compare the effects of market volatilities on Lithium Ionic and American Rare 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 Lithium Ionic with a short position of American Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithium Ionic and American Rare.
Diversification Opportunities for Lithium Ionic and American Rare
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lithium and American is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Ionic Corp and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths and Lithium Ionic 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 Lithium Ionic Corp are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of Lithium Ionic i.e., Lithium Ionic and American Rare go up and down completely randomly.
Pair Corralation between Lithium Ionic and American Rare
Assuming the 90 days horizon Lithium Ionic Corp is expected to under-perform the American Rare. But the otc stock apears to be less risky and, when comparing its historical volatility, Lithium Ionic Corp is 1.54 times less risky than American Rare. The otc stock trades about -0.01 of its potential returns per unit of risk. The American Rare Earths is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 21.00 in American Rare Earths on October 25, 2024 and sell it today you would lose (2.00) from holding American Rare Earths or give up 9.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithium Ionic Corp vs. American Rare Earths
Performance |
| Timeline |
| Lithium Ionic Corp |
| American Rare Earths |
Lithium Ionic and American Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithium Ionic and American Rare
The main advantage of trading using opposite Lithium Ionic and American Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Ionic position performs unexpectedly, American Rare 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 Rare will offset losses from the drop in American Rare's long position.| Lithium Ionic vs. IGO Limited | Lithium Ionic vs. Grid Metals Corp | Lithium Ionic vs. First American Silver | Lithium Ionic vs. Qubec Nickel Corp |
| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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