Correlation Between NEL ASA and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both NEL ASA 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 NEL ASA and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEL ASA ADR30 and Liontown Resources Limited, you can compare the effects of market volatilities on NEL ASA 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 NEL ASA with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and Liontown Resources.
Diversification Opportunities for NEL ASA and Liontown Resources
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NEL and Liontown is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and NEL ASA 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 NEL ASA ADR30 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 NEL ASA i.e., NEL ASA and Liontown Resources go up and down completely randomly.
Pair Corralation between NEL ASA and Liontown Resources
Assuming the 90 days trading horizon NEL ASA ADR30 is expected to under-perform the Liontown Resources. In addition to that, NEL ASA is 2.56 times more volatile than Liontown Resources Limited. It trades about -0.18 of its total potential returns per unit of risk. Liontown Resources Limited is currently generating about -0.19 per unit of volatility. If you would invest 53.00 in Liontown Resources Limited on August 31, 2024 and sell it today you would lose (7.00) from holding Liontown Resources Limited or give up 13.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEL ASA ADR30 vs. Liontown Resources Limited
Performance |
| Timeline |
| NEL ASA ADR30 |
| Liontown Resources |
NEL ASA and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEL ASA and Liontown Resources
The main advantage of trading using opposite NEL ASA and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEL ASA 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.| NEL ASA vs. CarsalesCom | NEL ASA vs. Southwest Airlines Co | NEL ASA vs. United Airlines Holdings | NEL ASA vs. Salesforce |
| Liontown Resources vs. Hitachi Construction Machinery | Liontown Resources vs. Vulcan Materials | Liontown Resources vs. AGRICULTBK HADR25 YC | Liontown Resources vs. EAGLE MATERIALS |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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