Correlation Between LION ONE and Sumitomo Chemical

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

Diversification Opportunities for LION ONE and Sumitomo Chemical

0.65

Correlation Coefficient

LION ONE  Sumitomo Chemical

Poor diversification

The 3 months correlation between LION and Sumitomo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of LION ONE i.e., LION ONE and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between LION ONE and Sumitomo Chemical

Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Sumitomo Chemical. In addition to that, LION ONE is 1.73 times more volatile than Sumitomo Chemical. It trades about -0.04 of its total potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.03 per unit of volatility. If you would invest  338.00  in Sumitomo Chemical on October 14, 2024 and sell it today you would lose (142.00) from holding Sumitomo Chemical or give up 42.01% of portfolio value over 90 days.

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

LION ONE METALS  vs.  Sumitomo Chemical

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sumitomo Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

Pair Trading with LION ONE and Sumitomo Chemical

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

The idea behind LION ONE METALS and Sumitomo Chemical 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.