Correlation Between Sienna Resources and American Lithium

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

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

Diversification Opportunities for Sienna Resources and American Lithium

0.26

Correlation Coefficient

Sienna Resources  American Lithium

Modest diversification

The 3 months correlation between Sienna and American is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sienna Resources 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 Sienna Resources 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 Sienna Resources 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 Sienna Resources i.e., Sienna Resources and American Lithium go up and down completely randomly.

Pair Corralation between Sienna Resources and American Lithium

Assuming the 90 days horizon Sienna Resources is expected to generate 2.08 times more return on investment than American Lithium. However, Sienna Resources is 2.08 times more volatile than American Lithium Corp. It trades about 0.04 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.02 per unit of risk. If you would invest  4.00  in Sienna Resources on October 1, 2024 and sell it today you would lose (1.00) from holding Sienna Resources or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sienna Resources  vs.  American Lithium Corp

Sienna Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sienna Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sienna Resources showed solid returns over the last few months and may actually be approaching a breakup point.

American Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sienna Resources and American Lithium

The main advantage of trading using opposite Sienna Resources and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sienna Resources 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.

The idea behind Sienna Resources and American Lithium Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.