Correlation Between Lion One and Postmedia Network
Can any of the company-specific risk be diversified away by investing in both Lion One and Postmedia Network 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 One and Postmedia Network into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion One Metals and Postmedia Network Canada, you can compare the effects of market volatilities on Lion One and Postmedia Network 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 One with a short position of Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion One and Postmedia Network.
Diversification Opportunities for Lion One and Postmedia Network
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lion and Postmedia is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada and Lion One 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 One Metals are associated (or correlated) with Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Lion One i.e., Lion One and Postmedia Network go up and down completely randomly.
Pair Corralation between Lion One and Postmedia Network
Assuming the 90 days horizon Lion One is expected to generate 1.11 times less return on investment than Postmedia Network. But when comparing it to its historical volatility, Lion One Metals is 1.17 times less risky than Postmedia Network. It trades about 0.18 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 117.00 in Postmedia Network Canada on October 20, 2024 and sell it today you would earn a total of 24.00 from holding Postmedia Network Canada or generate 20.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion One Metals vs. Postmedia Network Canada
Performance |
| Timeline |
| Lion One Metals |
| Postmedia Network Canada |
Lion One and Postmedia Network Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion One and Postmedia Network
The main advantage of trading using opposite Lion One and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One position performs unexpectedly, Postmedia Network 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 Postmedia Network will offset losses from the drop in Postmedia Network's long position.The idea behind Lion One Metals and Postmedia Network Canada 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.| Postmedia Network vs. Northstar Clean Technologies | Postmedia Network vs. Canlan Ice Sports | Postmedia Network vs. Thunderbird Entertainment Group | Postmedia Network vs. Blackrock Silver Corp |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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