Correlation Between Alphabet and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Lake Resources NL, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Lake Resources.
Diversification Opportunities for Alphabet and Lake Resources
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alphabet and Lake is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Lake Resources go up and down completely randomly.
Pair Corralation between Alphabet and Lake Resources
Given the investment horizon of 90 days Alphabet is expected to generate 2.09 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Alphabet Inc Class C is 3.86 times less risky than Lake Resources. It trades about 0.08 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.10 in Lake Resources NL on September 2, 2024 and sell it today you would earn a total of 0.30 from holding Lake Resources NL or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Lake Resources NL
Performance |
| Timeline |
| Alphabet Class C |
| Lake Resources NL |
Alphabet and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Lake Resources
The main advantage of trading using opposite Alphabet and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.The idea behind Alphabet Inc Class C and Lake Resources NL 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.| Lake Resources vs. Group 6 Metals | Lake Resources vs. Charter Hall Retail | Lake Resources vs. MFF Capital Investments | Lake Resources vs. Centaurus Metals |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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