Correlation Between United States and LION ONE
Can any of the company-specific risk be diversified away by investing in both United States and LION ONE 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 United States and LION ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and LION ONE METALS, you can compare the effects of market volatilities on United States and LION ONE 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 United States with a short position of LION ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and LION ONE.
Diversification Opportunities for United States and LION ONE
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and LION is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and LION ONE METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LION ONE METALS and United States 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 United States Steel are associated (or correlated) with LION ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LION ONE METALS has no effect on the direction of United States i.e., United States and LION ONE go up and down completely randomly.
Pair Corralation between United States and LION ONE
Assuming the 90 days trading horizon United States Steel is expected to generate 0.95 times more return on investment than LION ONE. However, United States Steel is 1.05 times less risky than LION ONE. It trades about 0.09 of its potential returns per unit of risk. LION ONE METALS is currently generating about -0.05 per unit of risk. If you would invest 3,602 in United States Steel on September 1, 2024 and sell it today you would earn a total of 188.00 from holding United States Steel or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. LION ONE METALS
Performance |
| Timeline |
| United States Steel |
| LION ONE METALS |
United States and LION ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and LION ONE
The main advantage of trading using opposite United States and LION ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, LION ONE 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 LION ONE will offset losses from the drop in LION ONE's long position.| United States vs. PT Indofood Sukses | United States vs. NIPPON MEAT PACKERS | United States vs. Food Life Companies | United States vs. Silicon Motion Technology |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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