Correlation Between Lion One and Compass Diversified

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

Diversification Opportunities for Lion One and Compass Diversified

0.69

Correlation Coefficient

Lion One  Compass Diversified

Poor diversification

The 3 months correlation between Lion and Compass is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Lion One i.e., Lion One and Compass Diversified go up and down completely randomly.

Pair Corralation between Lion One and Compass Diversified

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Compass Diversified. In addition to that, Lion One is 4.66 times more volatile than Compass Diversified Holdings. It trades about -0.05 of its total potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.03 per unit of volatility. If you would invest  2,393  in Compass Diversified Holdings on October 25, 2024 and sell it today you would earn a total of  37.00  from holding Compass Diversified Holdings or generate 1.55% 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.  Compass Diversified Holdings

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compass Diversified

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compass Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lion One and Compass Diversified

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

The idea behind Lion One Metals and Compass Diversified Holdings 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.