Correlation Between Stonex and Lion Financial

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

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

Diversification Opportunities for Stonex and Lion Financial

0.05

Correlation Coefficient

Stonex  Lion Financial

Significant diversification

The 3 months correlation between Stonex and Lion is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Stonex Group 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 Stonex 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 Stonex Group 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 Stonex i.e., Stonex and Lion Financial go up and down completely randomly.

Pair Corralation between Stonex and Lion Financial

Given the investment horizon of 90 days Stonex Group is expected to generate 0.26 times more return on investment than Lion Financial. However, Stonex Group is 3.78 times less risky than Lion Financial. It trades about 0.11 of its potential returns per unit of risk. Lion Financial Group is currently generating about 0.02 per unit of risk. If you would invest  9,871  in Stonex Group on September 12, 2024 and sell it today you would earn a total of  348.00  from holding Stonex Group or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Stonex Group  vs.  Lion Financial Group

Stonex Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stonex Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Stonex showed 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 conflicting essential indicators, Lion Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stonex and Lion Financial

The main advantage of trading using opposite Stonex and Lion Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stonex 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 Stonex Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.