Correlation Between Core Lithium and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both Core Lithium 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 Core Lithium and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Lithium and Liontown Resources Limited, you can compare the effects of market volatilities on Core Lithium 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 Core Lithium with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Lithium and Liontown Resources.
Diversification Opportunities for Core Lithium and Liontown Resources
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Core and Liontown is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Core Lithium and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Core Lithium 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 Core Lithium 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 Core Lithium i.e., Core Lithium and Liontown Resources go up and down completely randomly.
Pair Corralation between Core Lithium and Liontown Resources
Assuming the 90 days horizon Core Lithium is expected to generate 5.4 times less return on investment than Liontown Resources. In addition to that, Core Lithium is 1.78 times more volatile than Liontown Resources Limited. It trades about 0.03 of its total potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.25 per unit of volatility. If you would invest 33.00 in Liontown Resources Limited on October 20, 2024 and sell it today you would earn a total of 8.00 from holding Liontown Resources Limited or generate 24.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Core Lithium vs. Liontown Resources Limited
Performance |
| Timeline |
| Core Lithium |
| Liontown Resources |
Core Lithium and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Core Lithium and Liontown Resources
The main advantage of trading using opposite Core Lithium and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Lithium 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.| Core Lithium vs. Macmahon Holdings Limited | Core Lithium vs. Prime Meridian Resources | Core Lithium vs. International Lithium Corp | Core Lithium vs. Hudson Resources |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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