Correlation Between LION ONE and Chuangs China

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

Diversification Opportunities for LION ONE and Chuangs China

0.06

Correlation Coefficient

LION ONE  Chuangs China

Significant diversification

The 3 months correlation between LION and Chuangs is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Chuangs China Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuangs China Investments 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 Chuangs China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuangs China Investments has no effect on the direction of LION ONE i.e., LION ONE and Chuangs China go up and down completely randomly.

Pair Corralation between LION ONE and Chuangs China

Assuming the 90 days trading horizon LION ONE METALS is expected to generate 4.16 times more return on investment than Chuangs China. However, LION ONE is 4.16 times more volatile than Chuangs China Investments. It trades about 0.02 of its potential returns per unit of risk. Chuangs China Investments is currently generating about 0.0 per unit of risk. If you would invest  20.00  in LION ONE METALS on September 1, 2024 and sell it today you would earn a total of  0.00  from holding LION ONE METALS or generate 0.0% return on investment over 90 days.

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

LION ONE METALS  vs.  Chuangs China Investments

LION ONE METALS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LION ONE METALS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LION ONE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China 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 Chuangs China

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

The idea behind LION ONE METALS and Chuangs China Investments 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.