Correlation Between Lion One and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Lion One and Smith Douglas 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 Smith Douglas 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 Smith Douglas Homes, you can compare the effects of market volatilities on Lion One and Smith Douglas 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 Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion One and Smith Douglas.
Diversification Opportunities for Lion One and Smith Douglas
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lion and Smith is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Lion One i.e., Lion One and Smith Douglas go up and down completely randomly.
Pair Corralation between Lion One and Smith Douglas
Assuming the 90 days horizon Lion One Metals is expected to generate 1.53 times more return on investment than Smith Douglas. However, Lion One is 1.53 times more volatile than Smith Douglas Homes. It trades about -0.12 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.38 per unit of risk. If you would invest 20.00 in Lion One Metals on September 24, 2024 and sell it today you would lose (2.00) from holding Lion One Metals or give up 10.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.24% |
Values | Daily Returns |
Lion One Metals vs. Smith Douglas Homes
Performance |
Timeline |
Lion One Metals |
Smith Douglas Homes |
Lion One and Smith Douglas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lion One and Smith Douglas
The main advantage of trading using opposite Lion One and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' long position.Lion One vs. Irving Resources | Lion One vs. Headwater Gold | Lion One vs. Snowline Gold Corp | Lion One vs. Sokoman Minerals Corp |
Smith Douglas vs. TRI Pointe Homes | Smith Douglas vs. Meritage | Smith Douglas vs. Taylor Morn Home | Smith Douglas vs. Hovnanian Enterprises |
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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