Correlation Between Lion One and Philadelphia Semiconductor

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

Diversification Opportunities for Lion One and Philadelphia Semiconductor

0.5

Correlation Coefficient

Lion One  Philadelphia Semiconductor

Very weak diversification

The 3 months correlation between Lion and Philadelphia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Philadelphia Semiconductor Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philadelphia Semiconductor 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 Philadelphia Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philadelphia Semiconductor has no effect on the direction of Lion One i.e., Lion One and Philadelphia Semiconductor go up and down completely randomly.

Pair Corralation between Lion One and Philadelphia Semiconductor

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Philadelphia Semiconductor. In addition to that, Lion One is 2.11 times more volatile than Philadelphia Semiconductor Index. It trades about -0.2 of its total potential returns per unit of risk. Philadelphia Semiconductor Index is currently generating about 0.2 per unit of volatility. If you would invest  483,359  in Philadelphia Semiconductor Index on September 16, 2024 and sell it today you would earn a total of  31,619  from holding Philadelphia Semiconductor Index or generate 6.54% return on investment over 90 days.

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

Lion One Metals  vs.  Philadelphia Semiconductor Ind

Pair Trading with Lion One and Philadelphia Semiconductor

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

The idea behind Lion One Metals and Philadelphia Semiconductor Index 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.