Correlation Between Power Metals and Alpha Lithium

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

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

Diversification Opportunities for Power Metals and Alpha Lithium

-0.03

Correlation Coefficient

Power Metals  Alpha Lithium

Good diversification

The 3 months correlation between Power and Alpha is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Power Metals Corp and Alpha Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Lithium and Power Metals 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 Power Metals Corp are associated (or correlated) with Alpha Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Lithium has no effect on the direction of Power Metals i.e., Power Metals and Alpha Lithium go up and down completely randomly.

Pair Corralation between Power Metals and Alpha Lithium

Assuming the 90 days horizon Power Metals Corp is expected to under-perform the Alpha Lithium. But the otc stock apears to be less risky and, when comparing its historical volatility, Power Metals Corp is 3.65 times less risky than Alpha Lithium. The otc stock trades about -0.01 of its potential returns per unit of risk. The Alpha Lithium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Alpha Lithium on May 1, 2025 and sell it today you would lose (0.50) from holding Alpha Lithium or give up 5.88% of portfolio value over 90 days.

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

Power Metals Corp  vs.  Alpha Lithium

Power Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Power Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Alpha Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Lithium are ranked lower than 7 (%) 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.

Pair Trading with Power Metals and Alpha Lithium

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

The idea behind Power Metals Corp and Alpha Lithium 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.