Correlation Between LION ONE and ALEFARM BREWING

Can any of the company-specific risk be diversified away by investing in both LION ONE and ALEFARM BREWING 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 ALEFARM BREWING 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 ALEFARM BREWING DK 05, you can compare the effects of market volatilities on LION ONE and ALEFARM BREWING 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 ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of LION ONE and ALEFARM BREWING.

Diversification Opportunities for LION ONE and ALEFARM BREWING

0.53

Correlation Coefficient

LION ONE  ALEFARM BREWING

Very weak diversification

The 3 months correlation between LION and ALEFARM is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK 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 ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of LION ONE i.e., LION ONE and ALEFARM BREWING go up and down completely randomly.

Pair Corralation between LION ONE and ALEFARM BREWING

Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the ALEFARM BREWING. But the stock apears to be less risky and, when comparing its historical volatility, LION ONE METALS is 1.25 times less risky than ALEFARM BREWING. The stock trades about -0.05 of its potential returns per unit of risk. The ALEFARM BREWING DK 05 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  21.00  in ALEFARM BREWING DK 05 on September 12, 2024 and sell it today you would lose (3.00) from holding ALEFARM BREWING DK 05 or give up 14.29% of portfolio value over 90 days.

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

LION ONE METALS  vs.  ALEFARM BREWING DK 05

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ALEFARM BREWING DK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALEFARM BREWING DK 05 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 ALEFARM BREWING

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

The idea behind LION ONE METALS and ALEFARM BREWING DK 05 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.