Correlation Between Lion Financial and Charles Schwab
Can any of the company-specific risk be diversified away by investing in both Lion Financial and Charles Schwab 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 Charles Schwab 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 The Charles Schwab, you can compare the effects of market volatilities on Lion Financial and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Financial and Charles Schwab.
Diversification Opportunities for Lion Financial and Charles Schwab
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lion and Charles is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lion Financial Group and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Lion Financial i.e., Lion Financial and Charles Schwab go up and down completely randomly.
Pair Corralation between Lion Financial and Charles Schwab
Assuming the 90 days horizon Lion Financial Group is expected to generate 3.53 times more return on investment than Charles Schwab. However, Lion Financial is 3.53 times more volatile than The Charles Schwab. It trades about 0.05 of its potential returns per unit of risk. The Charles Schwab is currently generating about -0.22 per unit of risk. If you would invest 0.74 in Lion Financial Group on August 24, 2024 and sell it today you would earn a total of 0.02 from holding Lion Financial Group or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Financial Group vs. The Charles Schwab
Performance |
| Timeline |
| Lion Financial Group |
| Charles Schwab |
Lion Financial and Charles Schwab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Financial and Charles Schwab
The main advantage of trading using opposite Lion Financial and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Financial position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.The idea behind Lion Financial Group and The Charles Schwab 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.| Charles Schwab vs. The Charles Schwab | Charles Schwab vs. JPMorgan Chase Co | Charles Schwab vs. Morgan Stanley | Charles Schwab vs. JPMorgan Chase Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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