Correlation Between LEO and ATOM

Can any of the company-specific risk be diversified away by investing in both LEO and ATOM 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 LEO and ATOM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LEO and ATOM, you can compare the effects of market volatilities on LEO and ATOM 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 LEO with a short position of ATOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEO and ATOM.

Diversification Opportunities for LEO and ATOM

-0.1

Correlation Coefficient

LEO  ATOM

Good diversification

The 3 months correlation between LEO and ATOM is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding LEO and ATOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATOM and LEO 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 LEO are associated (or correlated) with ATOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATOM has no effect on the direction of LEO i.e., LEO and ATOM go up and down completely randomly.

Pair Corralation between LEO and ATOM

Assuming the 90 days trading horizon LEO is expected to generate 0.39 times more return on investment than ATOM. However, LEO is 2.58 times less risky than ATOM. It trades about 0.06 of its potential returns per unit of risk. ATOM is currently generating about -0.01 per unit of risk. If you would invest  878.00  in LEO on May 17, 2025 and sell it today you would earn a total of  46.00  from holding LEO or generate 5.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LEO  vs.  ATOM

LEO

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in LEO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, LEO is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ATOM

Risk-Adjusted Performance

Weakest

Over the last 90 days ATOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ATOM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LEO and ATOM

The main advantage of trading using opposite LEO and ATOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEO position performs unexpectedly, ATOM 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 ATOM will offset losses from the drop in ATOM's long position.

The idea behind LEO and ATOM 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.