Correlation Between Aldel Financial and Lithium Americas

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Can any of the company-specific risk be diversified away by investing in both Aldel Financial and Lithium Americas 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 Aldel Financial and Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aldel Financial II and Lithium Americas Corp, you can compare the effects of market volatilities on Aldel Financial and Lithium Americas 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 Aldel Financial with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Lithium Americas.

Diversification Opportunities for Aldel Financial and Lithium Americas

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between Aldel and Lithium is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Aldel Financial i.e., Aldel Financial and Lithium Americas go up and down completely randomly.

Pair Corralation between Aldel Financial and Lithium Americas

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.04 times more return on investment than Lithium Americas. However, Aldel Financial II is 26.6 times less risky than Lithium Americas. It trades about 0.12 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.22 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 4, 2024 and sell it today you would earn a total of  2.00  from holding Aldel Financial II or generate 0.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy61.9%
ValuesDaily Returns

Aldel Financial II  vs.  Lithium Americas Corp

 Performance 
       Timeline  
Aldel Financial II 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Lithium Americas Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Aldel Financial and Lithium Americas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aldel Financial and Lithium Americas

The main advantage of trading using opposite Aldel Financial and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.
The idea behind Aldel Financial II and Lithium Americas 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.
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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