Correlation Between Brookfield Investments and American Lithium

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

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

Diversification Opportunities for Brookfield Investments and American Lithium

0.15

Correlation Coefficient

Brookfield Investments  American Lithium

Average diversification

The 3 months correlation between Brookfield and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Investments and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp and Brookfield Investments 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 Brookfield Investments 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 Corp has no effect on the direction of Brookfield Investments i.e., Brookfield Investments and American Lithium go up and down completely randomly.

Pair Corralation between Brookfield Investments and American Lithium

Assuming the 90 days trading horizon Brookfield Investments is expected to generate 46.81 times less return on investment than American Lithium. But when comparing it to its historical volatility, Brookfield Investments is 17.32 times less risky than American Lithium. It trades about 0.05 of its potential returns per unit of risk. American Lithium Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  52.00  in American Lithium Corp on September 5, 2024 and sell it today you would earn a total of  36.00  from holding American Lithium Corp or generate 69.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	51.56%
Values	Daily Returns

Brookfield Investments  vs.  American Lithium Corp

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Lithium Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, American Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Investments and American Lithium

The main advantage of trading using opposite Brookfield Investments and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Investments 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 Brookfield Investments and American Lithium 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.