Correlation Between Netcapital and Lion Group

Can any of the company-specific risk be diversified away by investing in both Netcapital and Lion Group 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 Netcapital and Lion Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netcapital and Lion Group Holding, you can compare the effects of market volatilities on Netcapital and Lion Group 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 Netcapital with a short position of Lion Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netcapital and Lion Group.

Diversification Opportunities for Netcapital and Lion Group

-0.23

Correlation Coefficient

Netcapital  Lion Group

Very good diversification

The 3 months correlation between Netcapital and Lion is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Lion Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Group Holding and Netcapital 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 Netcapital are associated (or correlated) with Lion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Group Holding has no effect on the direction of Netcapital i.e., Netcapital and Lion Group go up and down completely randomly.

Pair Corralation between Netcapital and Lion Group

Given the investment horizon of 90 days Netcapital is expected to generate 0.68 times more return on investment than Lion Group. However, Netcapital is 1.47 times less risky than Lion Group. It trades about 0.06 of its potential returns per unit of risk. Lion Group Holding is currently generating about -0.01 per unit of risk. If you would invest  191.00  in Netcapital on November 29, 2024 and sell it today you would earn a total of  24.00  from holding Netcapital or generate 12.57% return on investment over 90 days.

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

Netcapital  vs.  Lion Group Holding

Netcapital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Lion Group Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lion Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Lion Group is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Netcapital and Lion Group

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

The idea behind Netcapital and Lion Group Holding 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.