Correlation Between Alpha Lithium and Australian Vanadium

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

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

Diversification Opportunities for Alpha Lithium and Australian Vanadium

0.11

Correlation Coefficient

Alpha Lithium  Australian Vanadium

Average diversification

The 3 months correlation between Alpha and Australian is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Lithium Corp and Australian Vanadium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Vanadium and Alpha 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 Alpha Lithium Corp are associated (or correlated) with Australian Vanadium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Vanadium has no effect on the direction of Alpha Lithium i.e., Alpha Lithium and Australian Vanadium go up and down completely randomly.

Pair Corralation between Alpha Lithium and Australian Vanadium

If you would invest  0.75  in Australian Vanadium Limited on October 26, 2024 and sell it today you would lose (0.15) from holding Australian Vanadium Limited or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

Alpha Lithium Corp  vs.  Australian Vanadium Limited

Alpha Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Australian Vanadium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Vanadium Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Australian Vanadium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Lithium and Australian Vanadium

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

The idea behind Alpha Lithium Corp and Australian Vanadium Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.