Correlation Between Lion One and InPlay Oil

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

Diversification Opportunities for Lion One and InPlay Oil

0.16

Correlation Coefficient

Lion One  InPlay Oil

Average diversification

The 3 months correlation between Lion and InPlay is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Lion One i.e., Lion One and InPlay Oil go up and down completely randomly.

Pair Corralation between Lion One and InPlay Oil

Assuming the 90 days horizon Lion One Metals is expected to generate 2.95 times more return on investment than InPlay Oil. However, Lion One is 2.95 times more volatile than InPlay Oil Corp. It trades about 0.01 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.11 per unit of risk. If you would invest  28.00  in Lion One Metals on December 2, 2024 and sell it today you would lose (2.00) from holding Lion One Metals or give up 7.14% of portfolio value over 90 days.

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

Lion One Metals  vs.  InPlay Oil Corp

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.

InPlay Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Lion One and InPlay Oil

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

The idea behind Lion One Metals and InPlay Oil Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.