Correlation Between Lion Chemtech and Green Cross

Can any of the company-specific risk be diversified away by investing in both Lion Chemtech and Green Cross 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 Green Cross 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 Green Cross Medical, you can compare the effects of market volatilities on Lion Chemtech and Green Cross 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 Green Cross. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Chemtech and Green Cross.

Diversification Opportunities for Lion Chemtech and Green Cross

-0.29

Correlation Coefficient

Lion Chemtech  Green Cross

Very good diversification

The 3 months correlation between Lion and Green is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Green Cross Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cross Medical 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 Green Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cross Medical has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Green Cross go up and down completely randomly.

Pair Corralation between Lion Chemtech and Green Cross

Assuming the 90 days trading horizon Lion Chemtech Co is expected to under-perform the Green Cross. But the stock apears to be less risky and, when comparing its historical volatility, Lion Chemtech Co is 1.47 times less risky than Green Cross. The stock trades about -0.01 of its potential returns per unit of risk. The Green Cross Medical is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  455,500  in Green Cross Medical on September 20, 2024 and sell it today you would lose (81,000) from holding Green Cross Medical or give up 17.78% of portfolio value over 90 days.

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

Lion Chemtech Co  vs.  Green Cross Medical

Lion Chemtech

Risk-Adjusted Performance

11 of 100

OK

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.

Green Cross Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Medical 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 Green Cross

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

The idea behind Lion Chemtech Co and Green Cross Medical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.