Correlation Between TT Electronics and LION ONE

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

By analyzing existing cross correlation between TT Electronics PLC and LION ONE METALS, you can compare the effects of market volatilities on TT Electronics and LION ONE 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 TT Electronics with a short position of LION ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and LION ONE.

Diversification Opportunities for TT Electronics and LION ONE

-0.6

Correlation Coefficient

TT Electronics  LION ONE

Excellent diversification

The 3 months correlation between 7TT and LION is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and LION ONE METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LION ONE METALS and TT Electronics 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 TT Electronics PLC are associated (or correlated) with LION ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LION ONE METALS has no effect on the direction of TT Electronics i.e., TT Electronics and LION ONE go up and down completely randomly.

Pair Corralation between TT Electronics and LION ONE

Assuming the 90 days trading horizon TT Electronics PLC is expected to generate 0.69 times more return on investment than LION ONE. However, TT Electronics PLC is 1.45 times less risky than LION ONE. It trades about -0.03 of its potential returns per unit of risk. LION ONE METALS is currently generating about -0.03 per unit of risk. If you would invest  174.00  in TT Electronics PLC on October 22, 2024 and sell it today you would lose (71.00) from holding TT Electronics PLC or give up 40.8% of portfolio value over 90 days.

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

TT Electronics PLC  vs.  LION ONE METALS

TT Electronics PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TT Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LION ONE METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LION ONE METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LION ONE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TT Electronics and LION ONE

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

The idea behind TT Electronics PLC and LION ONE METALS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.