Correlation Between Lemonade and New Gold
Can any of the company-specific risk be diversified away by investing in both Lemonade and New Gold 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 Lemonade and New Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lemonade and New Gold, you can compare the effects of market volatilities on Lemonade and New Gold 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 Lemonade with a short position of New Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemonade and New Gold.
Diversification Opportunities for Lemonade and New Gold
Good diversification
The 3 months correlation between Lemonade and New is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lemonade and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Gold and Lemonade 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 Lemonade are associated (or correlated) with New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of Lemonade i.e., Lemonade and New Gold go up and down completely randomly.
Pair Corralation between Lemonade and New Gold
Given the investment horizon of 90 days Lemonade is expected to generate 1.43 times more return on investment than New Gold. However, Lemonade is 1.43 times more volatile than New Gold. It trades about 0.12 of its potential returns per unit of risk. New Gold is currently generating about 0.1 per unit of risk. If you would invest 1,613 in Lemonade on August 25, 2024 and sell it today you would earn a total of 3,315 from holding Lemonade or generate 205.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lemonade vs. New Gold
Performance |
| Timeline |
| Lemonade |
| New Gold |
Lemonade and New Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lemonade and New Gold
The main advantage of trading using opposite Lemonade and New Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lemonade position performs unexpectedly, New Gold 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 New Gold will offset losses from the drop in New Gold's long position.| Lemonade vs. Fiverr International | Lemonade vs. Pinterest | Lemonade vs. Upstart Holdings | Lemonade vs. Fastly Inc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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