Correlation Between Lion One and Allegheny Technologies

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

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

Diversification Opportunities for Lion One and Allegheny Technologies

0.59

Correlation Coefficient

Lion One  Allegheny Technologies

Very weak diversification

The 3 months correlation between Lion and Allegheny is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies and Lion One 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 One Metals are associated (or correlated) with Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Lion One i.e., Lion One and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Lion One and Allegheny Technologies

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Allegheny Technologies. In addition to that, Lion One is 1.46 times more volatile than Allegheny Technologies Incorporated. It trades about -0.13 of its total potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.12 per unit of volatility. If you would invest  6,502  in Allegheny Technologies Incorporated on September 23, 2024 and sell it today you would lose (1,056) from holding Allegheny Technologies Incorporated or give up 16.24% of portfolio value over 90 days.

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

Lion One Metals  vs.  Allegheny Technologies Incorpo

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Allegheny Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lion One and Allegheny Technologies

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

The idea behind Lion One Metals and Allegheny Technologies Incorporated 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.