Correlation Between LION ONE and Providence Gold
Can any of the company-specific risk be diversified away by investing in both LION ONE and Providence 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 LION ONE and Providence Gold 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 Providence Gold Mines, you can compare the effects of market volatilities on LION ONE and Providence 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 LION ONE with a short position of Providence Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of LION ONE and Providence Gold.
Diversification Opportunities for LION ONE and Providence Gold
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LION and Providence is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Providence Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Providence Gold Mines 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 Providence Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Providence Gold Mines has no effect on the direction of LION ONE i.e., LION ONE and Providence Gold go up and down completely randomly.
Pair Corralation between LION ONE and Providence Gold
Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Providence Gold. But the stock apears to be less risky and, when comparing its historical volatility, LION ONE METALS is 8.3 times less risky than Providence Gold. The stock trades about -0.05 of its potential returns per unit of risk. The Providence Gold Mines is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1.15 in Providence Gold Mines on September 14, 2024 and sell it today you would lose (0.10) from holding Providence Gold Mines or give up 8.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
LION ONE METALS vs. Providence Gold Mines
Performance |
| Timeline |
| LION ONE METALS |
| Providence Gold Mines |
LION ONE and Providence Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LION ONE and Providence Gold
The main advantage of trading using opposite LION ONE and Providence Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LION ONE position performs unexpectedly, Providence 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 Providence Gold will offset losses from the drop in Providence Gold's long position.The idea behind LION ONE METALS and Providence Gold Mines 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.| Providence Gold vs. Perseus Mining Limited | Providence Gold vs. OURGAME INTHOLDL 00005 | Providence Gold vs. Scientific Games | Providence Gold vs. LION ONE METALS |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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