Correlation Between POWR Lithium and American Rare
Can any of the company-specific risk be diversified away by investing in both POWR Lithium 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 POWR Lithium and American Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POWR Lithium Corp and American Rare Earths, you can compare the effects of market volatilities on POWR Lithium 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 POWR Lithium with a short position of American Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of POWR Lithium and American Rare.
Diversification Opportunities for POWR Lithium and American Rare
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POWR and American is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding POWR Lithium 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 POWR 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 POWR Lithium 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 POWR Lithium i.e., POWR Lithium and American Rare go up and down completely randomly.
Pair Corralation between POWR Lithium and American Rare
Assuming the 90 days horizon POWR Lithium Corp is expected to generate 5.1 times more return on investment than American Rare. However, POWR Lithium is 5.1 times more volatile than American Rare Earths. It trades about 0.14 of its potential returns per unit of risk. American Rare Earths is currently generating about -0.04 per unit of risk. If you would invest 2.21 in POWR Lithium Corp on September 5, 2024 and sell it today you would earn a total of 1.61 from holding POWR Lithium Corp or generate 72.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
POWR Lithium Corp vs. American Rare Earths
Performance |
Timeline |
POWR Lithium Corp |
American Rare Earths |
POWR Lithium and American Rare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with POWR Lithium and American Rare
The main advantage of trading using opposite POWR Lithium and American Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POWR Lithium 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.POWR Lithium vs. Apple Inc | POWR Lithium vs. Microsoft | POWR Lithium vs. Amazon Inc | POWR Lithium vs. Alphabet Inc Class C |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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