Correlation Between Lion Electric and Terex

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

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

Diversification Opportunities for Lion Electric and Terex

-0.33

Correlation Coefficient

Lion Electric  Terex

Very good diversification

The 3 months correlation between Lion and Terex is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex and Lion Electric 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 Electric Corp are associated (or correlated) with Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Lion Electric i.e., Lion Electric and Terex go up and down completely randomly.

Pair Corralation between Lion Electric and Terex

Considering the 90-day investment horizon Lion Electric Corp is expected to under-perform the Terex. In addition to that, Lion Electric is 2.18 times more volatile than Terex. It trades about -0.41 of its total potential returns per unit of risk. Terex is currently generating about 0.02 per unit of volatility. If you would invest  5,992  in Terex on January 20, 2024 and sell it today you would earn a total of  33.00  from holding Terex or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Lion Electric Corp  vs.  Terex

Lion Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Terex

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Terex are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Terex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lion Electric and Terex

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

The idea behind Lion Electric Corp and Terex 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.