Correlation Between Applied Minerals and American Lithium

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

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

Diversification Opportunities for Applied Minerals and American Lithium

0.0

Correlation Coefficient

Applied Minerals  American Lithium

Pay attention - limited upside

The 3 months correlation between Applied and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Applied Minerals and American Lithium Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Minerals and Applied Minerals 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 Applied Minerals 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 Minerals has no effect on the direction of Applied Minerals i.e., Applied Minerals and American Lithium go up and down completely randomly.

Pair Corralation between Applied Minerals and American Lithium

If you would invest  1.85  in American Lithium Minerals on December 30, 2024 and sell it today you would earn a total of  0.71  from holding American Lithium Minerals or generate 38.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Applied Minerals  vs.  American Lithium Minerals

Applied Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Applied Minerals is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

American Lithium Minerals

Risk-Adjusted Performance

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.

Pair Trading with Applied Minerals and American Lithium

The main advantage of trading using opposite Applied Minerals and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Minerals 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 Applied Minerals and American Lithium Minerals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.