Correlation Between Lion Biotechnologies and Metro AG

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

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

Diversification Opportunities for Lion Biotechnologies and Metro AG

0.02

Correlation Coefficient

Lion Biotechnologies  Metro AG

Significant diversification

The 3 months correlation between Lion and Metro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and Lion Biotechnologies 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 Lion Biotechnologies are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Lion Biotechnologies i.e., Lion Biotechnologies and Metro AG go up and down completely randomly.

Pair Corralation between Lion Biotechnologies and Metro AG

Assuming the 90 days trading horizon Lion Biotechnologies is expected to under-perform the Metro AG. In addition to that, Lion Biotechnologies is 1.56 times more volatile than Metro AG. It trades about -0.4 of its total potential returns per unit of risk. Metro AG is currently generating about -0.08 per unit of volatility. If you would invest  500.00  in Metro AG on September 24, 2024 and sell it today you would lose (16.00) from holding Metro AG or give up 3.2% of portfolio value over 90 days.

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

Lion Biotechnologies  vs.  Metro AG

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lion Biotechnologies and Metro AG

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

The idea behind Lion Biotechnologies and Metro AG 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.