Correlation Between LION ONE and ITALIAN WINE

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

Diversification Opportunities for LION ONE and ITALIAN WINE

-0.07

Correlation Coefficient

LION ONE  ITALIAN WINE

Good diversification

The 3 months correlation between LION and ITALIAN is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of LION ONE i.e., LION ONE and ITALIAN WINE go up and down completely randomly.

Pair Corralation between LION ONE and ITALIAN WINE

Assuming the 90 days trading horizon LION ONE METALS is expected to generate 2.81 times more return on investment than ITALIAN WINE. However, LION ONE is 2.81 times more volatile than ITALIAN WINE BRANDS. It trades about 0.05 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.07 per unit of risk. If you would invest  16.00  in LION ONE METALS on December 3, 2024 and sell it today you would earn a total of  1.00  from holding LION ONE METALS or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

LION ONE METALS  vs.  ITALIAN WINE BRANDS

LION ONE METALS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LION ONE METALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LION ONE unveiled solid returns over the last few months and may actually be approaching a breakup point.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LION ONE and ITALIAN WINE

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

The idea behind LION ONE METALS and ITALIAN WINE BRANDS 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.