Correlation Between American Lithium and Computer Modelling

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

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

Diversification Opportunities for American Lithium and Computer Modelling

0.79

Correlation Coefficient

American Lithium  Computer Modelling

Poor diversification

The 3 months correlation between American and Computer is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling and American 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 American Lithium Corp are associated (or correlated) with Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of American Lithium i.e., American Lithium and Computer Modelling go up and down completely randomly.

Pair Corralation between American Lithium and Computer Modelling

Given the investment horizon of 90 days American Lithium Corp is expected to generate 1.83 times more return on investment than Computer Modelling. However, American Lithium is 1.83 times more volatile than Computer Modelling Group. It trades about -0.06 of its potential returns per unit of risk. Computer Modelling Group is currently generating about -0.17 per unit of risk. If you would invest  57.00  in American Lithium Corp on December 23, 2024 and sell it today you would lose (12.00) from holding American Lithium Corp or give up 21.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Lithium Corp  vs.  Computer Modelling Group

American Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Computer Modelling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with American Lithium and Computer Modelling

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

The idea behind American Lithium Corp and Computer Modelling Group 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 Stocks Directory module to find actively traded stocks across global markets.