Correlation Between American CuMo and Allkem

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

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

Diversification Opportunities for American CuMo and Allkem

-0.23

Correlation Coefficient

American CuMo  Allkem

Very good diversification

The 3 months correlation between American and Allkem is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding American CuMo Mining and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem and American CuMo 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 CuMo Mining are associated (or correlated) with Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of American CuMo i.e., American CuMo and Allkem go up and down completely randomly.

Pair Corralation between American CuMo and Allkem

If you would invest  2.00  in American CuMo Mining on September 15, 2024 and sell it today you would lose (1.00) from holding American CuMo Mining or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

American CuMo Mining  vs.  Allkem

American CuMo Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American CuMo Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American CuMo reported solid returns over the last few months and may actually be approaching a breakup point.

Allkem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American CuMo and Allkem

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

The idea behind American CuMo Mining and Allkem 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.