Correlation Between One World and US Lithium

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

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

Diversification Opportunities for One World and US Lithium

-0.16

Correlation Coefficient

One World  US Lithium

Good diversification

The 3 months correlation between One and LITH is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding One World Pharma 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 One World 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 One World Pharma 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 One World i.e., One World and US Lithium go up and down completely randomly.

Pair Corralation between One World and US Lithium

Given the investment horizon of 90 days One World Pharma is expected to generate 1.53 times more return on investment than US Lithium. However, One World is 1.53 times more volatile than US Lithium Corp. It trades about 0.06 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  2.30  in One World Pharma on November 29, 2024 and sell it today you would lose (0.12) from holding One World Pharma or give up 5.22% of portfolio value over 90 days.

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

One World Pharma  vs.  US Lithium Corp

One World Pharma

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in One World Pharma are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, One World exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with One World and US Lithium

The main advantage of trading using opposite One World and US Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One World 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.

The idea behind One World Pharma and US 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.