Correlation Between Lion One and VHAI

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

Diversification Opportunities for Lion One and VHAI

0.31

Correlation Coefficient

Lion One  VHAI

Weak diversification

The 3 months correlation between Lion and VHAI is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of Lion One i.e., Lion One and VHAI go up and down completely randomly.

Pair Corralation between Lion One and VHAI

Assuming the 90 days horizon Lion One Metals is expected to generate 0.29 times more return on investment than VHAI. However, Lion One Metals is 3.48 times less risky than VHAI. It trades about -0.11 of its potential returns per unit of risk. VHAI is currently generating about -0.11 per unit of risk. If you would invest  33.00  in Lion One Metals on September 23, 2024 and sell it today you would lose (15.00) from holding Lion One Metals or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.4%
Values	Daily Returns

Lion One Metals  vs.  VHAI

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.

VHAI

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating basic indicators, VHAI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion One and VHAI

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

The idea behind Lion One Metals and VHAI 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.