Correlation Between Lion Electric and Marijuana

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

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

Diversification Opportunities for Lion Electric and Marijuana

0.46

Correlation Coefficient

Lion Electric  Marijuana

Very weak diversification

The 3 months correlation between Lion and Marijuana is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana and Lion Electric 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 Electric Corp are associated (or correlated) with Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana has no effect on the direction of Lion Electric i.e., Lion Electric and Marijuana go up and down completely randomly.

Pair Corralation between Lion Electric and Marijuana

Considering the 90-day investment horizon Lion Electric Corp is expected to generate 0.95 times more return on investment than Marijuana. However, Lion Electric Corp is 1.06 times less risky than Marijuana. It trades about -0.07 of its potential returns per unit of risk. Marijuana is currently generating about -0.13 per unit of risk. If you would invest  66.00  in Lion Electric Corp on September 20, 2024 and sell it today you would lose (41.00) from holding Lion Electric Corp or give up 62.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Lion Electric Corp  vs.  Marijuana

Lion Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lion Electric and Marijuana

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

The idea behind Lion Electric Corp and Marijuana 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.