Correlation Between American Manganese and Global Li-Ion

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

By analyzing existing cross correlation between American Manganese and Global Li Ion Graphite, you can compare the effects of market volatilities on American Manganese and Global Li-Ion 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 Manganese with a short position of Global Li-Ion. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Manganese and Global Li-Ion.

Diversification Opportunities for American Manganese and Global Li-Ion

-0.36

Correlation Coefficient

American Manganese  Global Li-Ion

Very good diversification

The 3 months correlation between American and Global is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Manganese and Global Li Ion Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Li Ion and American Manganese 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 Manganese are associated (or correlated) with Global Li-Ion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Li Ion has no effect on the direction of American Manganese i.e., American Manganese and Global Li-Ion go up and down completely randomly.

Pair Corralation between American Manganese and Global Li-Ion

Assuming the 90 days horizon American Manganese is expected to generate 140.96 times less return on investment than Global Li-Ion. But when comparing it to its historical volatility, American Manganese is 2.25 times less risky than Global Li-Ion. It trades about 0.0 of its potential returns per unit of risk. Global Li Ion Graphite is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.38  in Global Li Ion Graphite on September 5, 2024 and sell it today you would lose (0.16) from holding Global Li Ion Graphite or give up 11.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

American Manganese  vs.  Global Li Ion Graphite

American Manganese

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Manganese has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Manganese is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Global Li Ion

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Li Ion Graphite are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Li-Ion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Manganese and Global Li-Ion

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

The idea behind American Manganese and Global Li Ion Graphite 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.