Correlation Between Lifezone Metals and American Battery

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

By analyzing existing cross correlation between Lifezone Metals Limited and American Battery Technology, you can compare the effects of market volatilities on Lifezone Metals and American Battery 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 Lifezone Metals with a short position of American Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifezone Metals and American Battery.

Diversification Opportunities for Lifezone Metals and American Battery

-0.39

Correlation Coefficient

Lifezone Metals  American Battery

Very good diversification

The 3 months correlation between Lifezone and American is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lifezone Metals Limited and American Battery Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Battery Tec and Lifezone 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 Lifezone Metals Limited are associated (or correlated) with American Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Battery Tec has no effect on the direction of Lifezone Metals i.e., Lifezone Metals and American Battery go up and down completely randomly.

Pair Corralation between Lifezone Metals and American Battery

Considering the 90-day investment horizon Lifezone Metals Limited is expected to generate 0.55 times more return on investment than American Battery. However, Lifezone Metals Limited is 1.8 times less risky than American Battery. It trades about 0.12 of its potential returns per unit of risk. American Battery Technology is currently generating about -0.02 per unit of risk. If you would invest  581.00  in Lifezone Metals Limited on September 5, 2024 and sell it today you would earn a total of  116.00  from holding Lifezone Metals Limited or generate 19.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lifezone Metals Limited  vs.  American Battery Technology

Lifezone Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lifezone Metals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Lifezone Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

American Battery Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Battery Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Battery is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lifezone Metals and American Battery

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

The idea behind Lifezone Metals Limited and American Battery Technology 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.