Correlation Between Black Rock and Lachlan Star
Can any of the company-specific risk be diversified away by investing in both Black Rock and Lachlan Star 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 Black Rock and Lachlan Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Rock Mining and Lachlan Star, you can compare the effects of market volatilities on Black Rock and Lachlan Star 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 Black Rock with a short position of Lachlan Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Rock and Lachlan Star.
Diversification Opportunities for Black Rock and Lachlan Star
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Lachlan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Black Rock Mining and Lachlan Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lachlan Star and Black Rock 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 Black Rock Mining are associated (or correlated) with Lachlan Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lachlan Star has no effect on the direction of Black Rock i.e., Black Rock and Lachlan Star go up and down completely randomly.
Pair Corralation between Black Rock and Lachlan Star
Assuming the 90 days trading horizon Black Rock Mining is expected to under-perform the Lachlan Star. But the stock apears to be less risky and, when comparing its historical volatility, Black Rock Mining is 1.71 times less risky than Lachlan Star. The stock trades about -0.05 of its potential returns per unit of risk. The Lachlan Star is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9.00 in Lachlan Star on September 12, 2024 and sell it today you would lose (0.50) from holding Lachlan Star or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Rock Mining vs. Lachlan Star
Performance |
| Timeline |
| Black Rock Mining |
| Lachlan Star |
Black Rock and Lachlan Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Rock and Lachlan Star
The main advantage of trading using opposite Black Rock and Lachlan Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Rock position performs unexpectedly, Lachlan Star 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 Lachlan Star will offset losses from the drop in Lachlan Star's long position.| Black Rock vs. Northern Star Resources | Black Rock vs. Evolution Mining | Black Rock vs. Bluescope Steel | Black Rock vs. Sandfire Resources NL |
| Lachlan Star vs. Black Rock Mining | Lachlan Star vs. Air New Zealand | Lachlan Star vs. Step One Clothing | Lachlan Star vs. Truscott Mining Corp |
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 CEOs Directory module to screen CEOs from public companies around the world.
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