Correlation Between LION ONE and STMICROELECTRONICS

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

Diversification Opportunities for LION ONE and STMICROELECTRONICS

0.49

Correlation Coefficient

LION ONE  STMICROELECTRONICS

Very weak diversification

The 3 months correlation between LION and STMICROELECTRONICS is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of LION ONE i.e., LION ONE and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between LION ONE and STMICROELECTRONICS

Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the STMICROELECTRONICS. In addition to that, LION ONE is 3.31 times more volatile than STMICROELECTRONICS. It trades about -0.01 of its total potential returns per unit of risk. STMICROELECTRONICS is currently generating about 0.02 per unit of volatility. If you would invest  2,352  in STMICROELECTRONICS on October 6, 2024 and sell it today you would earn a total of  20.00  from holding STMICROELECTRONICS or generate 0.85% 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.  STMICROELECTRONICS

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 comparatively stable basic indicators, LION ONE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LION ONE and STMICROELECTRONICS

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

The idea behind LION ONE METALS and STMICROELECTRONICS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.