Correlation Between US Lithium and Hemp

Can any of the company-specific risk be diversified away by investing in both US Lithium and Hemp 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 Hemp 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 Hemp Inc, you can compare the effects of market volatilities on US Lithium and Hemp 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 Hemp. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Lithium and Hemp.

Diversification Opportunities for US Lithium and Hemp

0.0

Correlation Coefficient

US Lithium  Hemp

Pay attention - limited upside

The 3 months correlation between LITH and Hemp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding US Lithium Corp and Hemp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemp Inc 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 Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemp Inc has no effect on the direction of US Lithium i.e., US Lithium and Hemp go up and down completely randomly.

Pair Corralation between US Lithium and Hemp

If you would invest  0.00  in Hemp Inc on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Hemp Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

US Lithium Corp  vs.  Hemp Inc

US Lithium Corp

Risk-Adjusted Performance

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 fairly strong basic indicators, US Lithium is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Hemp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Hemp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Lithium and Hemp

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

The idea behind US Lithium Corp and Hemp Inc 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.