Correlation Between Lion Financial and Thunder Bridge

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

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

Diversification Opportunities for Lion Financial and Thunder Bridge

-0.51

Correlation Coefficient

Lion Financial  Thunder Bridge

Excellent diversification

The 3 months correlation between Lion and Thunder is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lion Financial Group and Thunder Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Bridge Capital and Lion Financial 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 Financial Group are associated (or correlated) with Thunder Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Bridge Capital has no effect on the direction of Lion Financial i.e., Lion Financial and Thunder Bridge go up and down completely randomly.

Pair Corralation between Lion Financial and Thunder Bridge

Assuming the 90 days horizon Lion Financial Group is expected to generate 2.82 times more return on investment than Thunder Bridge. However, Lion Financial is 2.82 times more volatile than Thunder Bridge Capital. It trades about 0.02 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about -0.42 per unit of risk. If you would invest  0.78  in Lion Financial Group on October 6, 2024 and sell it today you would lose (0.07) from holding Lion Financial Group or give up 8.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.0%
Values	Daily Returns

Lion Financial Group  vs.  Thunder Bridge Capital

Lion Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Lion Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, Thunder Bridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion Financial and Thunder Bridge

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

The idea behind Lion Financial Group and Thunder Bridge Capital 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.