Correlation Between American Lithium and NeuPath Health

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

Diversification Opportunities for American Lithium and NeuPath Health

-0.59

Correlation Coefficient

American Lithium  NeuPath Health

Excellent diversification

The 3 months correlation between American and NeuPath is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and NeuPath Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuPath Health 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 NeuPath Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuPath Health has no effect on the direction of American Lithium i.e., American Lithium and NeuPath Health go up and down completely randomly.

Pair Corralation between American Lithium and NeuPath Health

Given the investment horizon of 90 days American Lithium Corp is expected to generate 2.44 times more return on investment than NeuPath Health. However, American Lithium is 2.44 times more volatile than NeuPath Health. It trades about 0.08 of its potential returns per unit of risk. NeuPath Health is currently generating about 0.06 per unit of risk. If you would invest  50.00  in American Lithium Corp on September 13, 2024 and sell it today you would earn a total of  13.00  from holding American Lithium Corp or generate 26.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Lithium Corp  vs.  NeuPath Health

American Lithium Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, American Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

NeuPath Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NeuPath Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NeuPath Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Lithium and NeuPath Health

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

The idea behind American Lithium Corp and NeuPath Health 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..