Correlation Between Solitario Exploration and American Lithium

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

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

Diversification Opportunities for Solitario Exploration and American Lithium

-0.42

Correlation Coefficient

Solitario Exploration  American Lithium

Very good diversification

The 3 months correlation between Solitario and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Solitario Exploration Royalty 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 Solitario Exploration 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 Solitario Exploration Royalty 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 Solitario Exploration i.e., Solitario Exploration and American Lithium go up and down completely randomly.

Pair Corralation between Solitario Exploration and American Lithium

Considering the 90-day investment horizon Solitario Exploration Royalty is expected to generate 0.96 times more return on investment than American Lithium. However, Solitario Exploration Royalty is 1.04 times less risky than American Lithium. It trades about 0.24 of its potential returns per unit of risk. American Lithium Corp is currently generating about 0.03 per unit of risk. If you would invest  51.00  in Solitario Exploration Royalty on February 18, 2024 and sell it today you would earn a total of  42.00  from holding Solitario Exploration Royalty or generate 82.35% return on investment over 90 days.

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

Solitario Exploration Royalty  vs.  American Lithium Corp

Solitario Exploration

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solitario Exploration Royalty are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Solitario Exploration disclosed solid returns over the last few months and may actually be approaching a breakup point.

American Lithium Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain essential indicators, American Lithium may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Solitario Exploration and American Lithium

The main advantage of trading using opposite Solitario Exploration and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solitario Exploration 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 Solitario Exploration Royalty 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.