Correlation Between Lion One and Catalyst Metals

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

Diversification Opportunities for Lion One and Catalyst Metals

0.84

Correlation Coefficient

Lion One  Catalyst Metals

Very poor diversification

The 3 months correlation between Lion and Catalyst is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Lion One i.e., Lion One and Catalyst Metals go up and down completely randomly.

Pair Corralation between Lion One and Catalyst Metals

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Catalyst Metals. But the otc stock apears to be less risky and, when comparing its historical volatility, Lion One Metals is 1.4 times less risky than Catalyst Metals. The otc stock trades about -0.08 of its potential returns per unit of risk. The Catalyst Metals Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Catalyst Metals Limited on October 11, 2024 and sell it today you would lose (30.00) from holding Catalyst Metals Limited or give up 15.38% of portfolio value over 90 days.

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

Lion One Metals  vs.  Catalyst Metals Limited

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 weak 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.

Catalyst Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lion One and Catalyst Metals

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

The idea behind Lion One Metals and Catalyst Metals Limited 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.