Correlation Between Vital Metals and American Lithium
Can any of the company-specific risk be diversified away by investing in both Vital Metals 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 Vital Metals and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vital Metals Limited and American Lithium Corp, you can compare the effects of market volatilities on Vital Metals 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 Vital Metals with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Metals and American Lithium.
Diversification Opportunities for Vital Metals and American Lithium
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vital and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vital Metals Limited 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 Vital Metals 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 Vital Metals 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 Corp has no effect on the direction of Vital Metals i.e., Vital Metals and American Lithium go up and down completely randomly.
Pair Corralation between Vital Metals and American Lithium
Assuming the 90 days horizon Vital Metals Limited is expected to generate 1.67 times more return on investment than American Lithium. However, Vital Metals is 1.67 times more volatile than American Lithium Corp. It trades about 0.07 of its potential returns per unit of risk. American Lithium Corp is currently generating about 0.0 per unit of risk. If you would invest 1.75 in Vital Metals Limited on September 3, 2024 and sell it today you would lose (1.55) from holding Vital Metals Limited or give up 88.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 22.32% |
| Values | Daily Returns |
Vital Metals Limited vs. American Lithium Corp
Performance |
| Timeline |
| Vital Metals Limited |
| American Lithium Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vital Metals and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Metals and American Lithium
The main advantage of trading using opposite Vital Metals and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Metals 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.| Vital Metals vs. Australian Vanadium Limited | Vital Metals vs. Avarone Metals | Vital Metals vs. Peak Resources Limited | Vital Metals vs. Huntsman Exploration |
| American Lithium vs. American Lithium Corp | American Lithium vs. Frontier Lithium | American Lithium vs. Cypress Development Corp | 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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