Correlation Between Software Acquisition and Lion One

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

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

Diversification Opportunities for Software Acquisition and Lion One

0.2

Correlation Coefficient

Software Acquisition  Lion One

Modest diversification

The 3 months correlation between Software and Lion is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals and Software Acquisition 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 Software Acquisition Group are associated (or correlated) with Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Software Acquisition i.e., Software Acquisition and Lion One go up and down completely randomly.

Pair Corralation between Software Acquisition and Lion One

Given the investment horizon of 90 days Software Acquisition Group is expected to generate 0.81 times more return on investment than Lion One. However, Software Acquisition Group is 1.23 times less risky than Lion One. It trades about 0.08 of its potential returns per unit of risk. Lion One Metals is currently generating about -0.1 per unit of risk. If you would invest  101.00  in Software Acquisition Group on November 28, 2024 and sell it today you would earn a total of  6.00  from holding Software Acquisition Group or generate 5.94% return on investment over 90 days.

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

Software Acquisition Group  vs.  Lion One Metals

Software Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Software Acquisition Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Software Acquisition is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lion One Metals

Risk-Adjusted Performance

Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Lion One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Software Acquisition and Lion One

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

The idea behind Software Acquisition Group and Lion One Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.