Correlation Between US Lithium and Pharmadrug

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

Diversification Opportunities for US Lithium and Pharmadrug

0.0

Correlation Coefficient

US Lithium  Pharmadrug

Pay attention - limited upside

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

Pair Corralation between US Lithium and Pharmadrug

If you would invest  0.95  in Pharmadrug on December 29, 2024 and sell it today you would lose (0.13) from holding Pharmadrug or give up 13.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

US Lithium Corp  vs.  Pharmadrug

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.

Pharmadrug

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmadrug are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Pharmadrug reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Lithium and Pharmadrug

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

The idea behind US Lithium Corp and Pharmadrug 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..