Correlation Between Western Sierra and Lion One

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

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

Diversification Opportunities for Western Sierra and Lion One

0.12

Correlation Coefficient

Western Sierra  Lion One

Average diversification

The 3 months correlation between Western and Lion is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining 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 Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and Lion One go up and down completely randomly.

Pair Corralation between Western Sierra and Lion One

Given the investment horizon of 90 days Western Sierra Mining is expected to generate 20.53 times more return on investment than Lion One. However, Western Sierra is 20.53 times more volatile than Lion One Metals. It trades about 0.11 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  0.35  in Western Sierra Mining on December 29, 2024 and sell it today you would lose (0.33) from holding Western Sierra Mining or give up 94.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Western Sierra Mining  vs.  Lion One Metals

Western Sierra Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Sierra Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Western Sierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lion One Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Lion One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Sierra and Lion One

The main advantage of trading using opposite Western Sierra and Lion One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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 Western Sierra Mining 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.