Correlation Between US Lithium and One World

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

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

Diversification Opportunities for US Lithium and One World

0.18

Correlation Coefficient

US Lithium  One World

Average diversification

The 3 months correlation between LITH and One is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding US Lithium Corp and One World Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One World Pharma and US 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 US Lithium Corp are associated (or correlated) with One World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One World Pharma has no effect on the direction of US Lithium i.e., US Lithium and One World go up and down completely randomly.

Pair Corralation between US Lithium and One World

Given the investment horizon of 90 days US Lithium Corp is expected to under-perform the One World. In addition to that, US Lithium is 1.28 times more volatile than One World Pharma. It trades about -0.22 of its total potential returns per unit of risk. One World Pharma is currently generating about 0.12 per unit of volatility. If you would invest  1.61  in One World Pharma on September 19, 2024 and sell it today you would earn a total of  0.27  from holding One World Pharma or generate 16.77% return on investment over 90 days.

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

US Lithium Corp  vs.  One World Pharma

US Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

One World Pharma

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in One World Pharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, One World exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Lithium and One World

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

The idea behind US Lithium Corp and One World Pharma 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.