Correlation Between Lion One and Tandy Leather

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

Diversification Opportunities for Lion One and Tandy Leather

-0.5

Correlation Coefficient

Lion One  Tandy Leather

Very good diversification

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

Pair Corralation between Lion One and Tandy Leather

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Tandy Leather. In addition to that, Lion One is 1.96 times more volatile than Tandy Leather Factory. It trades about -0.09 of its total potential returns per unit of risk. Tandy Leather Factory is currently generating about 0.02 per unit of volatility. If you would invest  445.00  in Tandy Leather Factory on October 2, 2024 and sell it today you would earn a total of  32.00  from holding Tandy Leather Factory or generate 7.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.56%
Values	Daily Returns

Lion One Metals  vs.  Tandy Leather Factory

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tandy Leather Factory

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Tandy Leather reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion One and Tandy Leather

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

The idea behind Lion One Metals and Tandy Leather Factory 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.