Correlation Between CV Sciences and US Lithium
Can any of the company-specific risk be diversified away by investing in both CV Sciences and US 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 CV Sciences and US Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CV Sciences and US Lithium Corp, you can compare the effects of market volatilities on CV Sciences and US 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 CV Sciences with a short position of US Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of CV Sciences and US Lithium.
Diversification Opportunities for CV Sciences and US Lithium
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVSI and LITH is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CV Sciences and US Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Lithium Corp and CV Sciences 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 CV Sciences are associated (or correlated) with US Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Lithium Corp has no effect on the direction of CV Sciences i.e., CV Sciences and US Lithium go up and down completely randomly.
Pair Corralation between CV Sciences and US Lithium
Given the investment horizon of 90 days CV Sciences is expected to generate 1.4 times more return on investment than US Lithium. However, CV Sciences is 1.4 times more volatile than US Lithium Corp. It trades about 0.04 of its potential returns per unit of risk. US Lithium Corp is currently generating about -0.13 per unit of risk. If you would invest 4.00 in CV Sciences on December 1, 2024 and sell it today you would lose (0.66) from holding CV Sciences or give up 16.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 96.77% |
Values | Daily Returns |
CV Sciences vs. US Lithium Corp
Performance |
Timeline |
CV Sciences |
US Lithium Corp |
CV Sciences and US Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CV Sciences and US Lithium
The main advantage of trading using opposite CV Sciences and US Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CV Sciences position performs unexpectedly, US 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 US Lithium will offset losses from the drop in US Lithium's long position.CV Sciences vs. Marimed | CV Sciences vs. General Cannabis Corp | CV Sciences vs. American Cannabis | CV Sciences vs. Cannabis Sativa |
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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 Stocks Directory module to find actively traded stocks across global markets.
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