Correlation Between Leons Furniture and Orogen Royalties

Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Orogen Royalties 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 Leons Furniture and Orogen Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leons Furniture Limited and Orogen Royalties, you can compare the effects of market volatilities on Leons Furniture and Orogen Royalties 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 Leons Furniture with a short position of Orogen Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Orogen Royalties.

Diversification Opportunities for Leons Furniture and Orogen Royalties

0.73

Correlation Coefficient

Leons Furniture  Orogen Royalties

Poor diversification

The 3 months correlation between Leons and Orogen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of Leons Furniture i.e., Leons Furniture and Orogen Royalties go up and down completely randomly.

Pair Corralation between Leons Furniture and Orogen Royalties

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Orogen Royalties. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 1.66 times less risky than Orogen Royalties. The stock trades about -0.18 of its potential returns per unit of risk. The Orogen Royalties is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Orogen Royalties on October 10, 2024 and sell it today you would lose (1.00) from holding Orogen Royalties or give up 0.74% of portfolio value over 90 days.

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

Leons Furniture Limited  vs.  Orogen Royalties

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Orogen Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orogen Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Leons Furniture and Orogen Royalties

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

The idea behind Leons Furniture Limited and Orogen Royalties 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.