Correlation Between Tearlach Resources and American Lithium
Can any of the company-specific risk be diversified away by investing in both Tearlach Resources 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 Tearlach Resources and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tearlach Resources Limited and American Lithium Minerals, you can compare the effects of market volatilities on Tearlach Resources 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 Tearlach Resources with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tearlach Resources and American Lithium.
Diversification Opportunities for Tearlach Resources and American Lithium
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tearlach and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tearlach Resources Limited 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 Tearlach Resources 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 Tearlach Resources Limited 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 Tearlach Resources i.e., Tearlach Resources and American Lithium go up and down completely randomly.
Pair Corralation between Tearlach Resources and American Lithium
Assuming the 90 days horizon Tearlach Resources is expected to generate 1.2 times less return on investment than American Lithium. In addition to that, Tearlach Resources is 1.21 times more volatile than American Lithium Minerals. It trades about 0.07 of its total potential returns per unit of risk. American Lithium Minerals is currently generating about 0.1 per unit of volatility. If you would invest 2.38 in American Lithium Minerals on October 26, 2024 and sell it today you would earn a total of 1.37 from holding American Lithium Minerals or generate 57.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Tearlach Resources Limited vs. American Lithium Minerals
Performance |
| Timeline |
| Tearlach Resources |
| American Lithium Minerals |
Tearlach Resources and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tearlach Resources and American Lithium
The main advantage of trading using opposite Tearlach Resources and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tearlach Resources 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.| Tearlach Resources vs. American Rare Earths | Tearlach Resources vs. Nova Lithium Corp | Tearlach Resources vs. POWR Lithium Corp | Tearlach Resources vs. Qubec Nickel Corp |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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