Correlation Between Rock Tech and American Lithium
Can any of the company-specific risk be diversified away by investing in both Rock Tech 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 Rock Tech and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rock Tech Lithium and American Lithium Corp, you can compare the effects of market volatilities on Rock Tech 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 Rock Tech with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Tech and American Lithium.
Diversification Opportunities for Rock Tech and American Lithium
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Rock and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp and Rock Tech 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 Rock Tech Lithium 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 Corp has no effect on the direction of Rock Tech i.e., Rock Tech and American Lithium go up and down completely randomly.
Pair Corralation between Rock Tech and American Lithium
Assuming the 90 days trading horizon Rock Tech Lithium is expected to under-perform the American Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Rock Tech Lithium is 1.23 times less risky than American Lithium. The stock trades about -0.02 of its potential returns per unit of risk. The American Lithium Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 190.00 in American Lithium Corp on September 3, 2024 and sell it today you would lose (126.00) from holding American Lithium Corp or give up 66.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rock Tech Lithium vs. American Lithium Corp
Performance |
| Timeline |
| Rock Tech Lithium |
| American Lithium Corp |
Rock Tech and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rock Tech and American Lithium
The main advantage of trading using opposite Rock Tech and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock Tech 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.| Rock Tech vs. Mineral Resources Limited | Rock Tech vs. Liontown Resources Limited | Rock Tech vs. American Lithium Corp | Rock Tech vs. ADRIATIC METALS LS 013355 |
| American Lithium vs. Standard Lithium | American Lithium vs. BYD Company Limited | American Lithium vs. Rock Tech Lithium |
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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