Correlation Between Blue Moon and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both Blue Moon and Liontown Resources 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 Blue Moon and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Moon Metals and Liontown Resources Limited, you can compare the effects of market volatilities on Blue Moon and Liontown Resources 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 Blue Moon with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Moon and Liontown Resources.
Diversification Opportunities for Blue Moon and Liontown Resources
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Liontown is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Blue Moon Metals and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Blue Moon 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 Blue Moon Metals are associated (or correlated) with Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of Blue Moon i.e., Blue Moon and Liontown Resources go up and down completely randomly.
Pair Corralation between Blue Moon and Liontown Resources
Assuming the 90 days horizon Blue Moon Metals is expected to generate 1.38 times more return on investment than Liontown Resources. However, Blue Moon is 1.38 times more volatile than Liontown Resources Limited. It trades about 0.22 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.07 per unit of risk. If you would invest 11.00 in Blue Moon Metals on September 2, 2024 and sell it today you would earn a total of 14.00 from holding Blue Moon Metals or generate 127.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Moon Metals vs. Liontown Resources Limited
Performance |
| Timeline |
| Blue Moon Metals |
| Liontown Resources |
Blue Moon and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Moon and Liontown Resources
The main advantage of trading using opposite Blue Moon and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Moon position performs unexpectedly, Liontown Resources 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 Liontown Resources will offset losses from the drop in Liontown Resources' long position.The idea behind Blue Moon Metals and Liontown Resources Limited 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.| Liontown Resources vs. Sayona Mining Limited | Liontown Resources vs. Core Lithium | Liontown Resources vs. Critical Elements | Liontown Resources vs. South32 ADR |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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