Correlation Between CHINA HUARONG and American Lithium
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG 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 CHINA HUARONG and American Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and American Lithium Corp, you can compare the effects of market volatilities on CHINA HUARONG 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 CHINA HUARONG with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and American Lithium.
Diversification Opportunities for CHINA HUARONG and American Lithium
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and American is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 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 CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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 CHINA HUARONG i.e., CHINA HUARONG and American Lithium go up and down completely randomly.
Pair Corralation between CHINA HUARONG and American Lithium
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 4.92 times more return on investment than American Lithium. However, CHINA HUARONG is 4.92 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 0.19 per unit of risk. If you would invest 0.15 in CHINA HUARONG ENERHD 50 on October 20, 2024 and sell it today you would lose (0.05) from holding CHINA HUARONG ENERHD 50 or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. American Lithium Corp
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| American Lithium Corp |
CHINA HUARONG and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and American Lithium
The main advantage of trading using opposite CHINA HUARONG and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG 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.| CHINA HUARONG vs. Alibaba Group Holding | CHINA HUARONG vs. ConocoPhillips | CHINA HUARONG vs. CNOOC | CHINA HUARONG vs. EOG Resources |
| American Lithium vs. Rio Tinto Group | American Lithium vs. Anglo American plc | American Lithium vs. Mineral Resources Limited | American Lithium vs. Liontown Resources Limited |
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.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |