Correlation Between Oracle and United Lithium

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

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

Diversification Opportunities for Oracle and United Lithium

0.18

Correlation Coefficient

Oracle  United Lithium

Average diversification

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

Pair Corralation between Oracle and United Lithium

Given the investment horizon of 90 days Oracle is expected to under-perform the United Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 2.92 times less risky than United Lithium. The stock trades about -0.05 of its potential returns per unit of risk. The United Lithium Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  13.00  in United Lithium Corp on December 29, 2024 and sell it today you would lose (3.00) from holding United Lithium Corp or give up 23.08% of portfolio value over 90 days.

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

Oracle  vs.  United Lithium Corp

Oracle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

United Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, United Lithium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oracle and United Lithium

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

The idea behind Oracle and United Lithium Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.