Correlation Between EDP - and LION ONE
Can any of the company-specific risk be diversified away by investing in both EDP - and LION ONE 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 EDP - and LION ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias and LION ONE METALS, you can compare the effects of market volatilities on EDP - and LION ONE 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 EDP - with a short position of LION ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP - and LION ONE.
Diversification Opportunities for EDP - and LION ONE
Average diversification
The 3 months correlation between EDP and LION is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and LION ONE METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LION ONE METALS and EDP - 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 EDP Energias are associated (or correlated) with LION ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LION ONE METALS has no effect on the direction of EDP - i.e., EDP - and LION ONE go up and down completely randomly.
Pair Corralation between EDP - and LION ONE
Assuming the 90 days trading horizon EDP Energias is expected to under-perform the LION ONE. But the stock apears to be less risky and, when comparing its historical volatility, EDP Energias is 2.09 times less risky than LION ONE. The stock trades about -0.08 of its potential returns per unit of risk. The LION ONE METALS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20.00 in LION ONE METALS on September 3, 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 |
EDP Energias vs. LION ONE METALS
Performance |
| Timeline |
| EDP Energias |
| LION ONE METALS |
EDP - and LION ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP - and LION ONE
The main advantage of trading using opposite EDP - and LION ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP - position performs unexpectedly, LION ONE 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 ONE will offset losses from the drop in LION ONE's long position.| EDP - vs. Harmony Gold Mining | EDP - vs. AIR PRODCHEMICALS | EDP - vs. Diamondrock Hospitality Co | EDP - vs. Jacquet Metal Service |
| LION ONE vs. HomeToGo SE | LION ONE vs. NORTHEAST UTILITIES | LION ONE vs. SBM OFFSHORE | LION ONE vs. Zijin Mining Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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