Correlation Between Lion One and Red Pine

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

Diversification Opportunities for Lion One and Red Pine

0.12

Correlation Coefficient

Lion One  Red Pine

Average diversification

The 3 months correlation between Lion and Red is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration 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 Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of Lion One i.e., Lion One and Red Pine go up and down completely randomly.

Pair Corralation between Lion One and Red Pine

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Red Pine. But the otc stock apears to be less risky and, when comparing its historical volatility, Lion One Metals is 1.49 times less risky than Red Pine. The otc stock trades about -0.04 of its potential returns per unit of risk. The Red Pine Exploration is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Red Pine Exploration on December 1, 2024 and sell it today you would lose (7.46) from holding Red Pine Exploration or give up 46.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Lion One Metals  vs.  Red Pine Exploration

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. Despite nearly stable essential indicators, Lion One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Red Pine Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Pine Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Red Pine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lion One and Red Pine

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

The idea behind Lion One Metals and Red Pine Exploration 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.