Correlation Between American Lithium and Québec Nickel

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

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

Diversification Opportunities for American Lithium and Québec Nickel

0.34

Correlation Coefficient

American Lithium  Québec Nickel

Weak diversification

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

Pair Corralation between American Lithium and Québec Nickel

Given the investment horizon of 90 days American Lithium Minerals is expected to generate 1.03 times more return on investment than Québec Nickel. However, American Lithium is 1.03 times more volatile than Qubec Nickel Corp. It trades about 0.1 of its potential returns per unit of risk. Qubec Nickel Corp is currently generating about -0.01 per unit of risk. If you would invest  2.04  in American Lithium Minerals on August 31, 2024 and sell it today you would earn a total of  0.68  from holding American Lithium Minerals or generate 33.33% return on investment over 90 days.

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

American Lithium Minerals  vs.  Qubec Nickel Corp

American Lithium Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, American Lithium displayed solid returns over the last few months and may actually be approaching a breakup point.

Qubec Nickel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qubec Nickel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Lithium and Québec Nickel

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

The idea behind American Lithium Minerals and Qubec Nickel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.