Correlation Between Q2 Metals and Leons Furniture

Can any of the company-specific risk be diversified away by investing in both Q2 Metals and Leons Furniture 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 Q2 Metals and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Metals Corp and Leons Furniture Limited, you can compare the effects of market volatilities on Q2 Metals and Leons Furniture 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 Q2 Metals with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Metals and Leons Furniture.

Diversification Opportunities for Q2 Metals and Leons Furniture

0.19

Correlation Coefficient

Q2 Metals  Leons Furniture

Average diversification

The 3 months correlation between QTWO and Leons is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Metals Corp and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Q2 Metals 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 Q2 Metals Corp are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Q2 Metals i.e., Q2 Metals and Leons Furniture go up and down completely randomly.

Pair Corralation between Q2 Metals and Leons Furniture

Assuming the 90 days trading horizon Q2 Metals Corp is expected to generate 5.42 times more return on investment than Leons Furniture. However, Q2 Metals is 5.42 times more volatile than Leons Furniture Limited. It trades about 0.06 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.13 per unit of risk. If you would invest  68.00  in Q2 Metals Corp on September 23, 2024 and sell it today you would earn a total of  10.00  from holding Q2 Metals Corp or generate 14.71% return on investment over 90 days.

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

Q2 Metals Corp  vs.  Leons Furniture Limited

Q2 Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Q2 Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Q2 Metals and Leons Furniture

The main advantage of trading using opposite Q2 Metals and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Metals position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.

The idea behind Q2 Metals Corp and Leons Furniture Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.