Correlation Between TMC The and American Lithium
Can any of the company-specific risk be diversified away by investing in both TMC The 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 TMC The and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMC the metals and American Lithium Corp, you can compare the effects of market volatilities on TMC The 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 TMC The with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMC The and American Lithium.
Diversification Opportunities for TMC The and American Lithium
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TMC and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TMC the metals 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 TMC The 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 TMC the metals 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 TMC The i.e., TMC The and American Lithium go up and down completely randomly.
Pair Corralation between TMC The and American Lithium
Assuming the 90 days horizon TMC the metals is expected to generate 3.07 times more return on investment than American Lithium. However, TMC The is 3.07 times more volatile than American Lithium Corp. It trades about 0.12 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.11 per unit of risk. If you would invest 6.70 in TMC the metals on August 31, 2024 and sell it today you would earn a total of 1.10 from holding TMC the metals or generate 16.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMC the metals vs. American Lithium Corp
Performance |
| Timeline |
| TMC the metals |
| American Lithium Corp |
TMC The and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMC The and American Lithium
The main advantage of trading using opposite TMC The and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMC The 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.The idea behind TMC the metals and American Lithium Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Lithium vs. Olympic Steel | American Lithium vs. Kaiser Aluminum | American Lithium vs. Diageo PLC ADR | American Lithium vs. Century Aluminum |
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.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |