Correlation Between Lion Electric and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Lion Electric and CEA Industries 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 Electric and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Electric Corp and CEA Industries, you can compare the effects of market volatilities on Lion Electric and CEA Industries 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 Electric with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Electric and CEA Industries.
Diversification Opportunities for Lion Electric and CEA Industries
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lion and CEA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Lion Electric 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 Electric Corp are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Lion Electric i.e., Lion Electric and CEA Industries go up and down completely randomly.
Pair Corralation between Lion Electric and CEA Industries
Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the CEA Industries. In addition to that, Lion Electric is 1.2 times more volatile than CEA Industries. It trades about -0.08 of its total potential returns per unit of risk. CEA Industries is currently generating about -0.02 per unit of volatility. If you would invest 1,260 in CEA Industries on August 28, 2024 and sell it today you would lose (662.00) from holding CEA Industries or give up 52.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Electric Corp vs. CEA Industries
Performance |
| Timeline |
| Lion Electric Corp |
| CEA Industries |
Lion Electric and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Electric and CEA Industries
The main advantage of trading using opposite Lion Electric and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Electric position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Lion Electric vs. Xos Inc | Lion Electric vs. Nikola Corp | Lion Electric vs. Wabash National | Lion Electric vs. American Premium Water |
| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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