Correlation Between Arizona Lithium and Glen Eagle

Can any of the company-specific risk be diversified away by investing in both Arizona Lithium and Glen Eagle 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 Glen Eagle 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 Glen Eagle Resources, you can compare the effects of market volatilities on Arizona Lithium and Glen Eagle 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 Glen Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arizona Lithium and Glen Eagle.

Diversification Opportunities for Arizona Lithium and Glen Eagle

0.31

Correlation Coefficient

Arizona Lithium  Glen Eagle

Weak diversification

The 3 months correlation between Arizona and Glen is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Lithium Limited and Glen Eagle Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glen Eagle Resources 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 Glen Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glen Eagle Resources has no effect on the direction of Arizona Lithium i.e., Arizona Lithium and Glen Eagle go up and down completely randomly.

Pair Corralation between Arizona Lithium and Glen Eagle

Assuming the 90 days horizon Arizona Lithium Limited is expected to generate 7.81 times more return on investment than Glen Eagle. However, Arizona Lithium is 7.81 times more volatile than Glen Eagle Resources. It trades about 0.13 of its potential returns per unit of risk. Glen Eagle Resources is currently generating about -0.13 per unit of risk. If you would invest  1.02  in Arizona Lithium Limited on December 29, 2024 and sell it today you would lose (0.57) from holding Arizona Lithium Limited or give up 55.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Arizona Lithium Limited  vs.  Glen Eagle Resources

Arizona Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Lithium Limited are ranked lower than 9 (%) 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.

Glen Eagle Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glen Eagle Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arizona Lithium and Glen Eagle

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

The idea behind Arizona Lithium Limited and Glen Eagle Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.