Correlation Between Allkem and American CuMo

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

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

Diversification Opportunities for Allkem and American CuMo

-0.76

Correlation Coefficient

Allkem  American CuMo

Pay attention - limited upside

The 3 months correlation between Allkem and American is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Allkem and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining and Allkem 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 Allkem are associated (or correlated) with American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Allkem i.e., Allkem and American CuMo go up and down completely randomly.

Pair Corralation between Allkem and American CuMo

If you would invest  3.00  in American CuMo Mining on October 25, 2024 and sell it today you would lose (1.50) from holding American CuMo Mining or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.64%
Values	Daily Returns

Allkem  vs.  American CuMo Mining

Allkem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

American CuMo Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American CuMo Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American CuMo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allkem and American CuMo

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

The idea behind Allkem and American CuMo Mining 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.