Correlation Between Liontown Resources and Core Lithium
Can any of the company-specific risk be diversified away by investing in both Liontown Resources and Core Lithium 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 Liontown Resources and Core Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liontown Resources Limited and Core Lithium, you can compare the effects of market volatilities on Liontown Resources and Core Lithium 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 Liontown Resources with a short position of Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and Core Lithium.
Diversification Opportunities for Liontown Resources and Core Lithium
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Liontown and Core is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium and Liontown 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 Liontown Resources Limited are associated (or correlated) with Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Liontown Resources i.e., Liontown Resources and Core Lithium go up and down completely randomly.
Pair Corralation between Liontown Resources and Core Lithium
Assuming the 90 days horizon Liontown Resources Limited is expected to generate 0.56 times more return on investment than Core Lithium. However, Liontown Resources Limited is 1.78 times less risky than Core Lithium. It trades about 0.25 of its potential returns per unit of risk. Core Lithium is currently generating about 0.03 per unit of risk. 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 |
Liontown Resources Limited vs. Core Lithium
Performance |
| Timeline |
| Liontown Resources |
| Core Lithium |
Liontown Resources and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liontown Resources and Core Lithium
The main advantage of trading using opposite Liontown Resources and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liontown Resources position performs unexpectedly, Core Lithium 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 Core Lithium will offset losses from the drop in Core Lithium's long position.| Liontown Resources vs. Sayona Mining Limited | Liontown Resources vs. Core Lithium | Liontown Resources vs. Critical Elements | Liontown Resources vs. South32 ADR |
| Core Lithium vs. Macmahon Holdings Limited | Core Lithium vs. Prime Meridian Resources | Core Lithium vs. International Lithium Corp | Core Lithium vs. Hudson Resources |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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