Correlation Between United Lithium and ACME Lithium
Can any of the company-specific risk be diversified away by investing in both United Lithium and ACME 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 United Lithium and ACME Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Lithium Corp and ACME Lithium, you can compare the effects of market volatilities on United Lithium and ACME 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 United Lithium with a short position of ACME Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Lithium and ACME Lithium.
Diversification Opportunities for United Lithium and ACME Lithium
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and ACME is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Lithium Corp and ACME Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACME Lithium and United 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 United Lithium Corp are associated (or correlated) with ACME Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACME Lithium has no effect on the direction of United Lithium i.e., United Lithium and ACME Lithium go up and down completely randomly.
Pair Corralation between United Lithium and ACME Lithium
Assuming the 90 days horizon United Lithium is expected to generate 17.98 times less return on investment than ACME Lithium. But when comparing it to its historical volatility, United Lithium Corp is 1.74 times less risky than ACME Lithium. It trades about 0.01 of its potential returns per unit of risk. ACME Lithium is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.28 in ACME Lithium on December 2, 2024 and sell it today you would earn a total of 0.67 from holding ACME Lithium or generate 29.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
United Lithium Corp vs. ACME Lithium
Performance |
Timeline |
United Lithium Corp |
ACME Lithium |
United Lithium and ACME Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Lithium and ACME Lithium
The main advantage of trading using opposite United Lithium and ACME Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Lithium position performs unexpectedly, ACME 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 ACME Lithium will offset losses from the drop in ACME Lithium's long position.United Lithium vs. Alpha Copper Corp | United Lithium vs. REDFLEX HOLDINGS LTD | United Lithium vs. Global Helium Corp | United Lithium vs. Ridgestone Mining |
ACME Lithium vs. United Lithium Corp | ACME Lithium vs. Alpha Copper Corp | ACME Lithium vs. REDFLEX HOLDINGS LTD | ACME Lithium vs. Global Helium Corp |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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