Correlation Between Lion Chemtech and Furonteer

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

Diversification Opportunities for Lion Chemtech and Furonteer

0.42

Correlation Coefficient

Lion Chemtech  Furonteer

Very weak diversification

The 3 months correlation between Lion and Furonteer is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Furonteer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furonteer 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 Furonteer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furonteer has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Furonteer go up and down completely randomly.

Pair Corralation between Lion Chemtech and Furonteer

Assuming the 90 days trading horizon Lion Chemtech is expected to generate 1.89 times less return on investment than Furonteer. But when comparing it to its historical volatility, Lion Chemtech Co is 1.05 times less risky than Furonteer. It trades about 0.07 of its potential returns per unit of risk. Furonteer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,635,000  in Furonteer on October 5, 2024 and sell it today you would earn a total of  290,000  from holding Furonteer or generate 11.01% return on investment over 90 days.

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

Lion Chemtech Co  vs.  Furonteer

Lion Chemtech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 7 (%) 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.

Furonteer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Furonteer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Furonteer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion Chemtech and Furonteer

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

The idea behind Lion Chemtech Co and Furonteer 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 Transaction History module to view history of all your transactions and understand their impact on performance.