Correlation Between Carbon Revolution and Lion One

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

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

Diversification Opportunities for Carbon Revolution and Lion One

-0.21

Correlation Coefficient

Carbon Revolution  Lion One

Very good diversification

The 3 months correlation between Carbon and Lion is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Carbon Revolution Public 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 Carbon Revolution 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 Carbon Revolution Public 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 Carbon Revolution i.e., Carbon Revolution and Lion One go up and down completely randomly.

Pair Corralation between Carbon Revolution and Lion One

Assuming the 90 days horizon Carbon Revolution Public is expected to generate 9.22 times more return on investment than Lion One. However, Carbon Revolution is 9.22 times more volatile than Lion One Metals. It trades about 0.21 of its potential returns per unit of risk. Lion One Metals is currently generating about 0.02 per unit of risk. If you would invest  2.55  in Carbon Revolution Public on October 4, 2024 and sell it today you would earn a total of  3.08  from holding Carbon Revolution Public or generate 120.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Carbon Revolution Public  vs.  Lion One Metals

Carbon Revolution Public

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carbon Revolution and Lion One

The main advantage of trading using opposite Carbon Revolution and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carbon Revolution 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 Carbon Revolution Public 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.