Correlation Between Lion One and 437076BK7

Can any of the company-specific risk be diversified away by investing in both Lion One and 437076BK7 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 437076BK7 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 HOME DEPOT INC, you can compare the effects of market volatilities on Lion One and 437076BK7 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 437076BK7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion One and 437076BK7.

Diversification Opportunities for Lion One and 437076BK7

0.5

Correlation Coefficient

Lion One  437076BK7

Very weak diversification

The 3 months correlation between Lion and 437076BK7 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and HOME DEPOT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT INC 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 437076BK7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOME DEPOT INC has no effect on the direction of Lion One i.e., Lion One and 437076BK7 go up and down completely randomly.

Pair Corralation between Lion One and 437076BK7

Assuming the 90 days horizon Lion One Metals is expected to under-perform the 437076BK7. In addition to that, Lion One is 13.7 times more volatile than HOME DEPOT INC. It trades about -0.09 of its total potential returns per unit of risk. HOME DEPOT INC is currently generating about -0.14 per unit of volatility. If you would invest  9,914  in HOME DEPOT INC on September 14, 2024 and sell it today you would lose (190.00) from holding HOME DEPOT INC or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Lion One Metals  vs.  HOME DEPOT INC

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 abnormal 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.

HOME DEPOT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOME DEPOT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 437076BK7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lion One and 437076BK7

The main advantage of trading using opposite Lion One and 437076BK7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One position performs unexpectedly, 437076BK7 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 437076BK7 will offset losses from the drop in 437076BK7's long position.

The idea behind Lion One Metals and HOME DEPOT INC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.