Correlation Between American Lithium and Allient

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

Diversification Opportunities for American Lithium and Allient

0.22

Correlation Coefficient

American Lithium  Allient

Modest diversification

The 3 months correlation between American and Allient is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Corp and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of American Lithium i.e., American Lithium and Allient go up and down completely randomly.

Pair Corralation between American Lithium and Allient

Given the investment horizon of 90 days American Lithium Corp is expected to generate 1.18 times more return on investment than Allient. However, American Lithium is 1.18 times more volatile than Allient. It trades about -0.01 of its potential returns per unit of risk. Allient is currently generating about -0.03 per unit of risk. If you would invest  74.00  in American Lithium Corp on March 4, 2024 and sell it today you would lose (5.00) from holding American Lithium Corp or give up 6.76% of portfolio value over 90 days.

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

American Lithium Corp  vs.  Allient

American Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, American Lithium is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Allient

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allient has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with American Lithium and Allient

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

The idea behind American Lithium Corp and Allient 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.