Correlation Between US Lithium and 1933 Industries
Can any of the company-specific risk be diversified away by investing in both US Lithium and 1933 Industries 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 1933 Industries 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 1933 Industries, you can compare the effects of market volatilities on US Lithium and 1933 Industries 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 1933 Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Lithium and 1933 Industries.
Diversification Opportunities for US Lithium and 1933 Industries
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LITH and 1933 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding US Lithium Corp and 1933 Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1933 Industries 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 1933 Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1933 Industries has no effect on the direction of US Lithium i.e., US Lithium and 1933 Industries go up and down completely randomly.
Pair Corralation between US Lithium and 1933 Industries
Given the investment horizon of 90 days US Lithium Corp is expected to under-perform the 1933 Industries. But the stock apears to be less risky and, when comparing its historical volatility, US Lithium Corp is 3.05 times less risky than 1933 Industries. The stock trades about -0.06 of its potential returns per unit of risk. The 1933 Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.80 in 1933 Industries on November 3, 2024 and sell it today you would lose (0.30) from holding 1933 Industries or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
US Lithium Corp vs. 1933 Industries
Performance |
| Timeline |
| US Lithium Corp |
| 1933 Industries |
US Lithium and 1933 Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Lithium and 1933 Industries
The main advantage of trading using opposite US Lithium and 1933 Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Lithium position performs unexpectedly, 1933 Industries 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 1933 Industries will offset losses from the drop in 1933 Industries' long position.| US Lithium vs. Mc Endvrs | US Lithium vs. Kali Inc | US Lithium vs. One World Pharma | US Lithium vs. HempAmericana |
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Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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