Correlation Between Liontown Resources and Nickel Mines
Can any of the company-specific risk be diversified away by investing in both Liontown Resources and Nickel Mines 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 Nickel Mines 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 Nickel Mines Limited, you can compare the effects of market volatilities on Liontown Resources and Nickel Mines 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 Nickel Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and Nickel Mines.
Diversification Opportunities for Liontown Resources and Nickel Mines
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Liontown and Nickel is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited 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 Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of Liontown Resources i.e., Liontown Resources and Nickel Mines go up and down completely randomly.
Pair Corralation between Liontown Resources and Nickel Mines
Assuming the 90 days horizon Liontown Resources Limited is expected to under-perform the Nickel Mines. In addition to that, Liontown Resources is 1.12 times more volatile than Nickel Mines Limited. It trades about -0.04 of its total potential returns per unit of risk. Nickel Mines Limited is currently generating about 0.02 per unit of volatility. If you would invest 56.00 in Nickel Mines Limited on August 26, 2024 and sell it today you would earn a total of 3.00 from holding Nickel Mines Limited or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liontown Resources Limited vs. Nickel Mines Limited
Performance |
| Timeline |
| Liontown Resources |
| Nickel Mines Limited |
Liontown Resources and Nickel Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liontown Resources and Nickel Mines
The main advantage of trading using opposite Liontown Resources and Nickel Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liontown Resources position performs unexpectedly, Nickel Mines 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 Nickel Mines will offset losses from the drop in Nickel Mines' long position.| Liontown Resources vs. Norra Metals Corp | Liontown Resources vs. ZincX Resources Corp | Liontown Resources vs. Nuinsco Resources Limited | Liontown Resources vs. South Star Battery |
| Nickel Mines vs. Norra Metals Corp | Nickel Mines vs. ZincX Resources Corp | Nickel Mines vs. Nuinsco Resources Limited | Nickel Mines vs. South Star Battery |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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