Correlation Between Lion Electric and Rubicon Organics

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

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

Diversification Opportunities for Lion Electric and Rubicon Organics

0.69

Correlation Coefficient

Lion Electric  Rubicon Organics

Poor diversification

The 3 months correlation between Lion and Rubicon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics and Lion Electric 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 Electric Corp are associated (or correlated) with Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Lion Electric i.e., Lion Electric and Rubicon Organics go up and down completely randomly.

Pair Corralation between Lion Electric and Rubicon Organics

Assuming the 90 days trading horizon Lion Electric Corp is expected to under-perform the Rubicon Organics. In addition to that, Lion Electric is 2.33 times more volatile than Rubicon Organics. It trades about -0.09 of its total potential returns per unit of risk. Rubicon Organics is currently generating about 0.03 per unit of volatility. If you would invest  42.00  in Rubicon Organics on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Rubicon Organics or generate 2.38% return on investment over 90 days.

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

Lion Electric Corp  vs.  Rubicon Organics

Lion Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rubicon Organics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lion Electric and Rubicon Organics

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

The idea behind Lion Electric Corp and Rubicon Organics 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.