Correlation Between NYSE Composite and American Lithium
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and American 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 NYSE Composite and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Lithium Minerals, you can compare the effects of market volatilities on NYSE Composite and American 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 NYSE Composite with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Lithium.
Diversification Opportunities for NYSE Composite and American Lithium
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between NYSE and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Lithium Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Minerals and NYSE Composite 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 NYSE Composite are associated (or correlated) with American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Minerals has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Lithium go up and down completely randomly.
Pair Corralation between NYSE Composite and American Lithium
Assuming the 90 days trading horizon NYSE Composite is expected to generate 21.22 times less return on investment than American Lithium. But when comparing it to its historical volatility, NYSE Composite is 19.51 times less risky than American Lithium. It trades about 0.28 of its potential returns per unit of risk. American Lithium Minerals is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2.00 in American Lithium Minerals on November 5, 2024 and sell it today you would earn a total of 1.93 from holding American Lithium Minerals or generate 96.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
NYSE Composite vs. American Lithium Minerals
Performance |
| Timeline |
NYSE Composite and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Lithium Minerals
Pair trading matchups for American Lithium
Pair Trading with NYSE Composite and American Lithium
The main advantage of trading using opposite NYSE Composite and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, American 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 American Lithium will offset losses from the drop in American Lithium's long position.| NYSE Composite vs. Lion One Metals | NYSE Composite vs. Codexis | NYSE Composite vs. Yuexiu Transport Infrastructure | NYSE Composite vs. Saia Inc |
| American Lithium vs. Artemis Resources | American Lithium vs. St Georges Eco Mining Corp | American Lithium vs. Atco Mining | American Lithium vs. Avarone Metals |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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