Correlation Between Lion One and Newcore Gold

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

Diversification Opportunities for Lion One and Newcore Gold

0.8

Correlation Coefficient

Lion One  Newcore Gold

Very poor diversification

The 3 months correlation between Lion and Newcore is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Newcore Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcore Gold 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 Newcore Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcore Gold has no effect on the direction of Lion One i.e., Lion One and Newcore Gold go up and down completely randomly.

Pair Corralation between Lion One and Newcore Gold

Assuming the 90 days horizon Lion One is expected to generate 1.6 times less return on investment than Newcore Gold. But when comparing it to its historical volatility, Lion One Metals is 1.16 times less risky than Newcore Gold. It trades about 0.03 of its potential returns per unit of risk. Newcore Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Newcore Gold on September 3, 2024 and sell it today you would earn a total of  2.00  from holding Newcore Gold or generate 6.67% return on investment over 90 days.

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

Lion One Metals  vs.  Newcore Gold

Lion One Metals

Risk-Adjusted Performance

2 of 100

Weak

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

Newcore Gold

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Lion One and Newcore Gold

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

The idea behind Lion One Metals and Newcore Gold 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.