Correlation Between American Lithium and Wealth Minerals

Can any of the company-specific risk be diversified away by investing in both American Lithium and Wealth Minerals 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 American Lithium and Wealth Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Lithium Corp and Wealth Minerals, you can compare the effects of market volatilities on American Lithium and Wealth Minerals 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 American Lithium with a short position of Wealth Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Wealth Minerals.

Diversification Opportunities for American Lithium and Wealth Minerals

0.09

Correlation Coefficient

American Lithium  Wealth Minerals

Significant diversification

The 3 months correlation between American and Wealth is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Wealth Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealth Minerals and American Lithium 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 American Lithium Corp are associated (or correlated) with Wealth Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealth Minerals has no effect on the direction of American Lithium i.e., American Lithium and Wealth Minerals go up and down completely randomly.

Pair Corralation between American Lithium and Wealth Minerals

Given the investment horizon of 90 days American Lithium Corp is expected to generate 0.81 times more return on investment than Wealth Minerals. However, American Lithium Corp is 1.23 times less risky than Wealth Minerals. It trades about -0.04 of its potential returns per unit of risk. Wealth Minerals is currently generating about -0.05 per unit of risk. If you would invest  280.00  in American Lithium Corp on September 21, 2024 and sell it today you would lose (229.00) from holding American Lithium Corp or give up 81.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

American Lithium Corp  vs.  Wealth Minerals

American Lithium Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, American Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Wealth Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wealth Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with American Lithium and Wealth Minerals

The main advantage of trading using opposite American Lithium and Wealth Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Lithium position performs unexpectedly, Wealth Minerals 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 Wealth Minerals will offset losses from the drop in Wealth Minerals' long position.

The idea behind American Lithium Corp and Wealth Minerals 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.