Correlation Between Moelis and Lion Financial

Can any of the company-specific risk be diversified away by investing in both Moelis and Lion Financial 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 Moelis and Lion Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Moelis Co and Lion Financial Group, you can compare the effects of market volatilities on Moelis and Lion Financial 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 Moelis with a short position of Lion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moelis and Lion Financial.

Diversification Opportunities for Moelis and Lion Financial

0.14

Correlation Coefficient

Moelis  Lion Financial

Average diversification

The 3 months correlation between Moelis and Lion is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and Lion Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Financial Group and Moelis 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 Moelis Co are associated (or correlated) with Lion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Financial Group has no effect on the direction of Moelis i.e., Moelis and Lion Financial go up and down completely randomly.

Pair Corralation between Moelis and Lion Financial

Allowing for the 90-day total investment horizon Moelis is expected to generate 6.13 times less return on investment than Lion Financial. But when comparing it to its historical volatility, Moelis Co is 6.62 times less risky than Lion Financial. It trades about 0.08 of its potential returns per unit of risk. Lion Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.59  in Lion Financial Group on September 4, 2024 and sell it today you would earn a total of  0.26  from holding Lion Financial Group or generate 44.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.17%
Values	Daily Returns

Moelis Co  vs.  Lion Financial Group

Moelis

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moelis Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Moelis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lion Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Lion Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moelis and Lion Financial

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

The idea behind Moelis Co and Lion Financial Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.