Correlation Between Canada Silver and American Lithium

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

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

Diversification Opportunities for Canada Silver and American Lithium

-0.7

Correlation Coefficient

Canada Silver  American Lithium

Excellent diversification

The 3 months correlation between Canada and American is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Canada Silver Cobalt 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 Canada Silver 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 Canada Silver Cobalt 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 Canada Silver i.e., Canada Silver and American Lithium go up and down completely randomly.

Pair Corralation between Canada Silver and American Lithium

Assuming the 90 days horizon Canada Silver Cobalt is expected to under-perform the American Lithium. In addition to that, Canada Silver is 1.5 times more volatile than American Lithium Corp. It trades about -0.07 of its total potential returns per unit of risk. American Lithium Corp is currently generating about -0.1 per unit of volatility. If you would invest  70.00  in American Lithium Corp on September 5, 2024 and sell it today you would lose (7.00) from holding American Lithium Corp or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Canada Silver Cobalt  vs.  American Lithium Corp

Canada Silver Cobalt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canada Silver Cobalt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite fairly fragile essential indicators, American Lithium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canada Silver and American Lithium

The main advantage of trading using opposite Canada Silver and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Silver 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 Canada Silver Cobalt 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.