Correlation Between Lion Metal and Optima Prima
Can any of the company-specific risk be diversified away by investing in both Lion Metal and Optima Prima 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 Metal and Optima Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Metal Works and Optima Prima Metal, you can compare the effects of market volatilities on Lion Metal and Optima Prima 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 Metal with a short position of Optima Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Optima Prima.
Diversification Opportunities for Lion Metal and Optima Prima
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lion and Optima is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Lion Metal 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 Metal Works are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Lion Metal i.e., Lion Metal and Optima Prima go up and down completely randomly.
Pair Corralation between Lion Metal and Optima Prima
Assuming the 90 days trading horizon Lion Metal Works is expected to under-perform the Optima Prima. But the stock apears to be less risky and, when comparing its historical volatility, Lion Metal Works is 1.01 times less risky than Optima Prima. The stock trades about -0.03 of its potential returns per unit of risk. The Optima Prima Metal is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,000 in Optima Prima Metal on September 12, 2024 and sell it today you would earn a total of 0.00 from holding Optima Prima Metal or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Metal Works vs. Optima Prima Metal
Performance |
| Timeline |
| Lion Metal Works |
| Optima Prima Metal |
Lion Metal and Optima Prima Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Metal and Optima Prima
The main advantage of trading using opposite Lion Metal and Optima Prima positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Metal position performs unexpectedly, Optima Prima 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 Optima Prima will offset losses from the drop in Optima Prima's long position.| Lion Metal vs. Lionmesh Prima Tbk | Lion Metal vs. Pelangi Indah Canindo | Lion Metal vs. Indal Aluminium Industry | Lion Metal vs. Intanwijaya Internasional Tbk |
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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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