Correlation Between Lion Biotechnologies and Summit Materials

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

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

Diversification Opportunities for Lion Biotechnologies and Summit Materials

-0.24

Correlation Coefficient

Lion Biotechnologies  Summit Materials

Very good diversification

The 3 months correlation between Lion and Summit is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Lion Biotechnologies 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 Biotechnologies are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Lion Biotechnologies i.e., Lion Biotechnologies and Summit Materials go up and down completely randomly.

Pair Corralation between Lion Biotechnologies and Summit Materials

Assuming the 90 days trading horizon Lion Biotechnologies is expected to generate 2.71 times more return on investment than Summit Materials. However, Lion Biotechnologies is 2.71 times more volatile than Summit Materials. It trades about 0.03 of its potential returns per unit of risk. Summit Materials is currently generating about 0.06 per unit of risk. If you would invest  595.00  in Lion Biotechnologies on October 5, 2024 and sell it today you would earn a total of  107.00  from holding Lion Biotechnologies or generate 17.98% return on investment over 90 days.

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

Lion Biotechnologies  vs.  Summit Materials

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Summit Materials

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion Biotechnologies and Summit Materials

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

The idea behind Lion Biotechnologies and Summit Materials 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 Anywhere module to track or share privately all of your investments from the convenience of any device.