Correlation Between Lion One and NOVARTIS

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

Diversification Opportunities for Lion One and NOVARTIS

0.48

Correlation Coefficient

Lion One  NOVARTIS

Very weak diversification

The 3 months correlation between Lion and NOVARTIS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and NOVARTIS CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAP P 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 NOVARTIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVARTIS CAP P has no effect on the direction of Lion One i.e., Lion One and NOVARTIS go up and down completely randomly.

Pair Corralation between Lion One and NOVARTIS

Assuming the 90 days horizon Lion One Metals is expected to generate 3.45 times more return on investment than NOVARTIS. However, Lion One is 3.45 times more volatile than NOVARTIS CAP P. It trades about 0.02 of its potential returns per unit of risk. NOVARTIS CAP P is currently generating about 0.03 per unit of risk. If you would invest  21.00  in Lion One Metals on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Lion One Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Lion One Metals  vs.  NOVARTIS CAP P

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.

NOVARTIS CAP P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAP P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS 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 NOVARTIS

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

The idea behind Lion One Metals and NOVARTIS CAP P 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.