Correlation Between Lion One and Stroud Resources
Can any of the company-specific risk be diversified away by investing in both Lion One and Stroud Resources 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 Stroud Resources 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 Stroud Resources, you can compare the effects of market volatilities on Lion One and Stroud Resources 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 Stroud Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion One and Stroud Resources.
Diversification Opportunities for Lion One and Stroud Resources
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lion and Stroud is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Stroud Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stroud Resources 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 Stroud Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stroud Resources has no effect on the direction of Lion One i.e., Lion One and Stroud Resources go up and down completely randomly.
Pair Corralation between Lion One and Stroud Resources
Assuming the 90 days horizon Lion One is expected to generate 4.04 times less return on investment than Stroud Resources. But when comparing it to its historical volatility, Lion One Metals is 5.51 times less risky than Stroud Resources. It trades about 0.03 of its potential returns per unit of risk. Stroud Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Stroud Resources on September 2, 2024 and sell it today you would lose (5.00) from holding Stroud Resources or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion One Metals vs. Stroud Resources
Performance |
| Timeline |
| Lion One Metals |
| Stroud Resources |
Lion One and Stroud Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion One and Stroud Resources
The main advantage of trading using opposite Lion One and Stroud Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One position performs unexpectedly, Stroud Resources 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 Stroud Resources will offset losses from the drop in Stroud Resources' long position.The idea behind Lion One Metals and Stroud Resources 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.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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