Correlation Between Lindian Resources and Centaurus Metals
Can any of the company-specific risk be diversified away by investing in both Lindian Resources and Centaurus Metals 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 Lindian Resources and Centaurus Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lindian Resources and Centaurus Metals, you can compare the effects of market volatilities on Lindian Resources and Centaurus Metals 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 Lindian Resources with a short position of Centaurus Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindian Resources and Centaurus Metals.
Diversification Opportunities for Lindian Resources and Centaurus Metals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lindian and Centaurus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lindian Resources and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and Lindian Resources 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 Lindian Resources are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Lindian Resources i.e., Lindian Resources and Centaurus Metals go up and down completely randomly.
Pair Corralation between Lindian Resources and Centaurus Metals
Assuming the 90 days trading horizon Lindian Resources is expected to generate 1.36 times more return on investment than Centaurus Metals. However, Lindian Resources is 1.36 times more volatile than Centaurus Metals. It trades about 0.01 of its potential returns per unit of risk. Centaurus Metals is currently generating about -0.03 per unit of risk. If you would invest 21.00 in Lindian Resources on November 1, 2024 and sell it today you would lose (10.00) from holding Lindian Resources or give up 47.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lindian Resources vs. Centaurus Metals
Performance |
| Timeline |
| Lindian Resources |
| Centaurus Metals |
Lindian Resources and Centaurus Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lindian Resources and Centaurus Metals
The main advantage of trading using opposite Lindian Resources and Centaurus Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindian Resources position performs unexpectedly, Centaurus Metals 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 Centaurus Metals will offset losses from the drop in Centaurus Metals' long position.| Lindian Resources vs. Sonic Healthcare | Lindian Resources vs. Microequities Asset Management | Lindian Resources vs. Regal Funds Management | Lindian Resources vs. Australian Agricultural |
| Centaurus Metals vs. Platinum Asset Management | Centaurus Metals vs. Qbe Insurance Group | Centaurus Metals vs. Autosports Group | Centaurus Metals vs. K2 Asset Management |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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