Correlation Between American Lithium and Pembina Pipeline

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

Diversification Opportunities for American Lithium and Pembina Pipeline

0.84

Correlation Coefficient

American Lithium  Pembina Pipeline

Very poor diversification

The 3 months correlation between American and Pembina is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of American Lithium i.e., American Lithium and Pembina Pipeline go up and down completely randomly.

Pair Corralation between American Lithium and Pembina Pipeline

Given the investment horizon of 90 days American Lithium Corp is expected to under-perform the Pembina Pipeline. In addition to that, American Lithium is 2.66 times more volatile than Pembina Pipeline Corp. It trades about -0.25 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.14 per unit of volatility. If you would invest  5,335  in Pembina Pipeline Corp on December 1, 2024 and sell it today you would earn a total of  289.00  from holding Pembina Pipeline Corp or generate 5.42% return on investment over 90 days.

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

American Lithium Corp  vs.  Pembina Pipeline Corp

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.

Pembina Pipeline Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Lithium and Pembina Pipeline

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

The idea behind American Lithium Corp and Pembina Pipeline 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 Transaction History module to view history of all your transactions and understand their impact on performance.