Correlation Between Lion Financial and Royalty Management

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Can any of the company-specific risk be diversified away by investing in both Lion Financial and Royalty Management 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 Financial and Royalty Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Financial Group and Royalty Management Holding, you can compare the effects of market volatilities on Lion Financial and Royalty Management 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 Financial with a short position of Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Financial and Royalty Management.

Diversification Opportunities for Lion Financial and Royalty Management

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lion and Royalty is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lion Financial Group and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management and Lion Financial 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 Financial Group are associated (or correlated) with Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Lion Financial i.e., Lion Financial and Royalty Management go up and down completely randomly.

Pair Corralation between Lion Financial and Royalty Management

Assuming the 90 days horizon Lion Financial Group is expected to generate 2.18 times more return on investment than Royalty Management. However, Lion Financial is 2.18 times more volatile than Royalty Management Holding. It trades about 0.09 of its potential returns per unit of risk. Royalty Management Holding is currently generating about 0.08 per unit of risk. If you would invest  0.76  in Lion Financial Group on October 9, 2024 and sell it today you would earn a total of  0.07  from holding Lion Financial Group or generate 9.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lion Financial Group  vs.  Royalty Management Holding

 Performance 
       Timeline  
Lion Financial Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Lion Financial Group are ranked lower than 1 (%) 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.
Royalty Management 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Royalty Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lion Financial and Royalty Management Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lion Financial and Royalty Management

The main advantage of trading using opposite Lion Financial and Royalty Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Financial position performs unexpectedly, Royalty Management 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 Royalty Management will offset losses from the drop in Royalty Management's long position.
The idea behind Lion Financial Group and Royalty Management Holding 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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