Correlation Between WELL Health and American Lithium

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

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

Diversification Opportunities for WELL Health and American Lithium

0.88

Correlation Coefficient

WELL Health  American Lithium

Very poor diversification

The 3 months correlation between WELL and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp and WELL Health 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 WELL Health Technologies are associated (or correlated) with American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of WELL Health i.e., WELL Health and American Lithium go up and down completely randomly.

Pair Corralation between WELL Health and American Lithium

Assuming the 90 days trading horizon WELL Health Technologies is expected to under-perform the American Lithium. But the stock apears to be less risky and, when comparing its historical volatility, WELL Health Technologies is 1.91 times less risky than American Lithium. The stock trades about -0.21 of its potential returns per unit of risk. The American Lithium Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  54.00  in American Lithium Corp on December 29, 2024 and sell it today you would lose (12.00) from holding American Lithium Corp or give up 22.22% of portfolio value over 90 days.

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

WELL Health Technologies  vs.  American Lithium Corp

WELL Health Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days WELL Health Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 unfluctuating 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.

Pair Trading with WELL Health and American Lithium

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

The idea behind WELL Health Technologies and American Lithium 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.