Correlation Between Lion One and CHUGOKU EL

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

Diversification Opportunities for Lion One and CHUGOKU EL

0.47

Correlation Coefficient

Lion One  CHUGOKU EL

Very weak diversification

The 3 months correlation between Lion and CHUGOKU is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and CHUGOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUGOKU EL PWR 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 CHUGOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUGOKU EL PWR has no effect on the direction of Lion One i.e., Lion One and CHUGOKU EL go up and down completely randomly.

Pair Corralation between Lion One and CHUGOKU EL

Assuming the 90 days horizon Lion One Metals is expected to under-perform the CHUGOKU EL. In addition to that, Lion One is 2.0 times more volatile than CHUGOKU EL PWR. It trades about -0.04 of its total potential returns per unit of risk. CHUGOKU EL PWR is currently generating about 0.03 per unit of volatility. If you would invest  444.00  in CHUGOKU EL PWR on September 14, 2024 and sell it today you would earn a total of  91.00  from holding CHUGOKU EL PWR or generate 20.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Lion One Metals  vs.  CHUGOKU EL PWR

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 basic 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.

CHUGOKU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHUGOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lion One and CHUGOKU EL

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

The idea behind Lion One Metals and CHUGOKU EL PWR 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.