Correlation Between Critical Elements and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Critical Elements and Lake 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 Critical Elements and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Critical Elements and Lake Resources NL, you can compare the effects of market volatilities on Critical Elements and Lake 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 Critical Elements with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Lake Resources.
Diversification Opportunities for Critical Elements and Lake Resources
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Critical and Lake is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL and Critical Elements 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 Critical Elements are associated (or correlated) with Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Critical Elements i.e., Critical Elements and Lake Resources go up and down completely randomly.
Pair Corralation between Critical Elements and Lake Resources
Assuming the 90 days horizon Critical Elements is expected to generate 6.8 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Critical Elements is 2.28 times less risky than Lake Resources. It trades about 0.02 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.47 in Lake Resources NL on August 29, 2024 and sell it today you would earn a total of 0.53 from holding Lake Resources NL or generate 21.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Critical Elements vs. Lake Resources NL
Performance |
| Timeline |
| Critical Elements |
| Lake Resources NL |
Critical Elements and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Critical Elements and Lake Resources
The main advantage of trading using opposite Critical Elements and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Elements position performs unexpectedly, Lake 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 Lake Resources will offset losses from the drop in Lake Resources' long position.| Critical Elements vs. Argosy Minerals Limited | Critical Elements vs. Aurelia Metals Limited | Critical Elements vs. Artemis Resources | Critical Elements vs. Ascendant Resources |
| Lake Resources vs. Eastman Kodak Co | Lake Resources vs. Old Dominion Freight | Lake Resources vs. Mesa Air Group | Lake Resources vs. Catalent |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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