Correlation Between Alpha Lithium and Compass Minerals

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

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

Diversification Opportunities for Alpha Lithium and Compass Minerals

0.04

Correlation Coefficient

Alpha Lithium  Compass Minerals

Significant diversification

The 3 months correlation between Alpha and Compass is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Lithium and Compass Minerals International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Minerals Int and Alpha 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 Alpha Lithium are associated (or correlated) with Compass Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Minerals Int has no effect on the direction of Alpha Lithium i.e., Alpha Lithium and Compass Minerals go up and down completely randomly.

Pair Corralation between Alpha Lithium and Compass Minerals

Assuming the 90 days horizon Alpha Lithium is expected to generate 10.55 times more return on investment than Compass Minerals. However, Alpha Lithium is 10.55 times more volatile than Compass Minerals International. It trades about 0.11 of its potential returns per unit of risk. Compass Minerals International is currently generating about 0.08 per unit of risk. If you would invest  12.00  in Alpha Lithium on May 10, 2025 and sell it today you would earn a total of  0.00  from holding Alpha Lithium or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Alpha Lithium  vs.  Compass Minerals International

Alpha Lithium

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Alpha Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Compass Minerals Int

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Minerals International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Compass Minerals may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Alpha Lithium and Compass Minerals

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

The idea behind Alpha Lithium and Compass Minerals International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.