Correlation Between Lion One and DIRTT Environmental

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

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

Diversification Opportunities for Lion One and DIRTT Environmental

0.61

Correlation Coefficient

Lion One  DIRTT Environmental

Poor diversification

The 3 months correlation between Lion and DIRTT is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and DIRTT Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIRTT Environmental and Lion One 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 One Metals are associated (or correlated) with DIRTT Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIRTT Environmental has no effect on the direction of Lion One i.e., Lion One and DIRTT Environmental go up and down completely randomly.

Pair Corralation between Lion One and DIRTT Environmental

Assuming the 90 days horizon Lion One is expected to generate 7.76 times less return on investment than DIRTT Environmental. In addition to that, Lion One is 1.72 times more volatile than DIRTT Environmental Solutions. It trades about 0.0 of its total potential returns per unit of risk. DIRTT Environmental Solutions is currently generating about 0.04 per unit of volatility. If you would invest  101.00  in DIRTT Environmental Solutions on November 29, 2024 and sell it today you would earn a total of  6.00  from holding DIRTT Environmental Solutions or generate 5.94% return on investment over 90 days.

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

Lion One Metals  vs.  DIRTT Environmental Solutions

Lion One Metals

Risk-Adjusted Performance

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 fairly stable basic indicators, Lion One is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

DIRTT Environmental

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DIRTT Environmental Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIRTT Environmental may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Lion One and DIRTT Environmental

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

The idea behind Lion One Metals and DIRTT Environmental Solutions 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.