Correlation Between Lion One and H FARM

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

Diversification Opportunities for Lion One and H FARM

0.57

Correlation Coefficient

Lion One  H FARM

Very weak diversification

The 3 months correlation between Lion and 5JQ is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA 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 H FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of Lion One i.e., Lion One and H FARM go up and down completely randomly.

Pair Corralation between Lion One and H FARM

Assuming the 90 days horizon Lion One Metals is expected to generate 1.12 times more return on investment than H FARM. However, Lion One is 1.12 times more volatile than H FARM SPA. It trades about 0.01 of its potential returns per unit of risk. H FARM SPA is currently generating about -0.01 per unit of risk. If you would invest  18.00  in Lion One Metals on September 11, 2024 and sell it today you would lose (1.00) from holding Lion One Metals or give up 5.56% 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.  H FARM SPA

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 nearly stable basic indicators, Lion One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H FARM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lion One and H FARM

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

The idea behind Lion One Metals and H FARM SPA 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.