Correlation Between Arizona Lithium and Bayview Acquisition

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

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

Diversification Opportunities for Arizona Lithium and Bayview Acquisition

0.05

Correlation Coefficient

Arizona Lithium  Bayview Acquisition

Significant diversification

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

Pair Corralation between Arizona Lithium and Bayview Acquisition

Assuming the 90 days horizon Arizona Lithium Limited is expected to generate 15.03 times more return on investment than Bayview Acquisition. However, Arizona Lithium is 15.03 times more volatile than Bayview Acquisition Corp. It trades about 0.05 of its potential returns per unit of risk. Bayview Acquisition Corp is currently generating about 0.04 per unit of risk. If you would invest  4.60  in Arizona Lithium Limited on September 4, 2024 and sell it today you would lose (3.60) from holding Arizona Lithium Limited or give up 78.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.19%
Values	Daily Returns

Arizona Lithium Limited  vs.  Bayview Acquisition Corp

Arizona Lithium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Lithium Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arizona Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Bayview Acquisition Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bayview Acquisition Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bayview Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arizona Lithium and Bayview Acquisition

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

The idea behind Arizona Lithium Limited and Bayview Acquisition 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.