Correlation Between Winpak and Lion One

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

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

Diversification Opportunities for Winpak and Lion One

-0.09

Correlation Coefficient

Winpak  Lion One

Good diversification

The 3 months correlation between Winpak and Lion is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Winpak 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 Winpak 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 Winpak 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 Winpak i.e., Winpak and Lion One go up and down completely randomly.

Pair Corralation between Winpak and Lion One

Assuming the 90 days trading horizon Winpak is expected to generate 0.35 times more return on investment than Lion One. However, Winpak is 2.88 times less risky than Lion One. It trades about 0.02 of its potential returns per unit of risk. Lion One Metals is currently generating about -0.06 per unit of risk. If you would invest  4,334  in Winpak on October 24, 2024 and sell it today you would earn a total of  142.00  from holding Winpak or generate 3.28% return on investment over 90 days.

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

Winpak  vs.  Lion One Metals

Winpak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winpak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Winpak is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Winpak and Lion One

The main advantage of trading using opposite Winpak and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winpak 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 Winpak 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.