Correlation Between Lion Chemtech and Automobile

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

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

Diversification Opportunities for Lion Chemtech and Automobile

-0.17

Correlation Coefficient

Lion Chemtech  Automobile

Good diversification

The 3 months correlation between Lion and Automobile is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc and Lion Chemtech 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 Chemtech Co are associated (or correlated) with Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Automobile go up and down completely randomly.

Pair Corralation between Lion Chemtech and Automobile

Assuming the 90 days trading horizon Lion Chemtech Co is expected to generate 1.3 times more return on investment than Automobile. However, Lion Chemtech is 1.3 times more volatile than Automobile Pc. It trades about 0.15 of its potential returns per unit of risk. Automobile Pc is currently generating about -0.06 per unit of risk. If you would invest  255,500  in Lion Chemtech Co on September 22, 2024 and sell it today you would earn a total of  30,500  from holding Lion Chemtech Co or generate 11.94% return on investment over 90 days.

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

Lion Chemtech Co  vs.  Automobile Pc

Lion Chemtech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech sustained solid returns over the last few months and may actually be approaching a breakup point.

Automobile Pc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automobile Pc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lion Chemtech and Automobile

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

The idea behind Lion Chemtech Co and Automobile Pc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.