Correlation Between Allkem and Arizona Lithium
Can any of the company-specific risk be diversified away by investing in both Allkem and Arizona 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 Allkem and Arizona Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allkem and Arizona Lithium Limited, you can compare the effects of market volatilities on Allkem and Arizona 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 Allkem with a short position of Arizona Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allkem and Arizona Lithium.
Diversification Opportunities for Allkem and Arizona Lithium
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allkem and Arizona is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Allkem and Arizona Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Lithium and Allkem 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 Allkem are associated (or correlated) with Arizona Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Lithium has no effect on the direction of Allkem i.e., Allkem and Arizona Lithium go up and down completely randomly.
Pair Corralation between Allkem and Arizona Lithium
If you would invest 1.39 in Arizona Lithium Limited on November 2, 2024 and sell it today you would lose (0.54) from holding Arizona Lithium Limited or give up 38.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 5.26% |
| Values | Daily Returns |
Allkem vs. Arizona Lithium Limited
Performance |
| Timeline |
| Allkem |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Arizona Lithium |
Allkem and Arizona Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allkem and Arizona Lithium
The main advantage of trading using opposite Allkem and Arizona Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allkem position performs unexpectedly, Arizona 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 Arizona Lithium will offset losses from the drop in Arizona Lithium's long position.| Allkem vs. Eastman Chemical | Allkem vs. Aldel Financial II | Allkem vs. Ecolab Inc | Allkem vs. Artisan Partners Asset |
| Arizona Lithium vs. Bushveld Minerals Limited | Arizona Lithium vs. Aurelia Metals Limited | Arizona Lithium vs. Artemis Resources | Arizona Lithium vs. Ascendant Resources |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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