Correlation Between Lion Electric and CEA Industries

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

Diversification Opportunities for Lion Electric and CEA Industries

-0.05

Correlation Coefficient

Lion Electric  CEA Industries

Good diversification

The 3 months correlation between Lion and CEA is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries 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 CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Lion Electric i.e., Lion Electric and CEA Industries go up and down completely randomly.

Pair Corralation between Lion Electric and CEA Industries

Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the CEA Industries. In addition to that, Lion Electric is 5.01 times more volatile than CEA Industries. It trades about -0.07 of its total potential returns per unit of risk. CEA Industries is currently generating about 0.35 per unit of volatility. If you would invest  598.00  in CEA Industries on September 24, 2024 and sell it today you would earn a total of  226.00  from holding CEA Industries or generate 37.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Lion Electric Corp  vs.  CEA Industries

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CEA Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, CEA Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion Electric and CEA Industries

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

The idea behind Lion Electric Corp and CEA Industries 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 CEOs Directory module to screen CEOs from public companies around the world.