Correlation Between Lion Electric and Track

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

Diversification Opportunities for Lion Electric and Track

0.36

Correlation Coefficient

Lion Electric  Track

Weak diversification

The 3 months correlation between Lion and Track is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Track Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Track Group 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 Track. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Track Group has no effect on the direction of Lion Electric i.e., Lion Electric and Track go up and down completely randomly.

Pair Corralation between Lion Electric and Track

Considering the 90-day investment horizon Lion Electric Corp is expected to generate 1.4 times more return on investment than Track. However, Lion Electric is 1.4 times more volatile than Track Group. It trades about 0.06 of its potential returns per unit of risk. Track Group is currently generating about 0.06 per unit of risk. If you would invest  36.00  in Lion Electric Corp on September 14, 2024 and sell it today you would lose (2.00) from holding Lion Electric Corp or give up 5.56% of portfolio value over 90 days.

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

Lion Electric Corp  vs.  Track Group

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.

Track Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Track Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Track is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lion Electric and Track

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

The idea behind Lion Electric Corp and Track Group 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.