Correlation Between Scotch Creek and Ameriwest Lithium

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

By analyzing existing cross correlation between Scotch Creek Ventures and Ameriwest Lithium, you can compare the effects of market volatilities on Scotch Creek and Ameriwest 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 Scotch Creek with a short position of Ameriwest Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotch Creek and Ameriwest Lithium.

Diversification Opportunities for Scotch Creek and Ameriwest Lithium

0.55

Correlation Coefficient

Scotch Creek  Ameriwest Lithium

Very weak diversification

The 3 months correlation between Scotch and Ameriwest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Scotch Creek Ventures and Ameriwest Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriwest Lithium and Scotch Creek 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 Scotch Creek Ventures are associated (or correlated) with Ameriwest Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriwest Lithium has no effect on the direction of Scotch Creek i.e., Scotch Creek and Ameriwest Lithium go up and down completely randomly.

Pair Corralation between Scotch Creek and Ameriwest Lithium

Assuming the 90 days horizon Scotch Creek Ventures is expected to generate 1.53 times more return on investment than Ameriwest Lithium. However, Scotch Creek is 1.53 times more volatile than Ameriwest Lithium. It trades about 0.12 of its potential returns per unit of risk. Ameriwest Lithium is currently generating about 0.12 per unit of risk. If you would invest  2.60  in Scotch Creek Ventures on December 30, 2024 and sell it today you would earn a total of  1.80  from holding Scotch Creek Ventures or generate 69.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Scotch Creek Ventures  vs.  Ameriwest Lithium

Scotch Creek Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scotch Creek Ventures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Scotch Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Ameriwest Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriwest Lithium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Ameriwest Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scotch Creek and Ameriwest Lithium

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

The idea behind Scotch Creek Ventures and Ameriwest Lithium 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.