Correlation Between POWR Lithium and American Rare

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

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

Diversification Opportunities for POWR Lithium and American Rare

-0.34

Correlation Coefficient

POWR Lithium  American Rare

Very good diversification

The 3 months correlation between POWR and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding POWR Lithium Corp and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths and POWR 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 POWR Lithium Corp are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of POWR Lithium i.e., POWR Lithium and American Rare go up and down completely randomly.

Pair Corralation between POWR Lithium and American Rare

Assuming the 90 days horizon POWR Lithium Corp is expected to generate 16.59 times more return on investment than American Rare. However, POWR Lithium is 16.59 times more volatile than American Rare Earths. It trades about 0.13 of its potential returns per unit of risk. American Rare Earths is currently generating about 0.02 per unit of risk. If you would invest  4.74  in POWR Lithium Corp on September 4, 2024 and sell it today you would earn a total of  1.16  from holding POWR Lithium Corp or generate 24.47% return on investment over 90 days.

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

POWR Lithium Corp  vs.  American Rare Earths

POWR Lithium Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POWR Lithium Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, POWR Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

American Rare Earths

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with POWR Lithium and American Rare

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

The idea behind POWR Lithium Corp and American Rare Earths 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.