Correlation Between Liontown Resources and Rockridge Resources
Can any of the company-specific risk be diversified away by investing in both Liontown Resources and Rockridge 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 Liontown Resources and Rockridge Resources 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 Rockridge Resources, you can compare the effects of market volatilities on Liontown Resources and Rockridge 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 Liontown Resources with a short position of Rockridge Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and Rockridge Resources.
Diversification Opportunities for Liontown Resources and Rockridge Resources
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Liontown and Rockridge is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Rockridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockridge Resources 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 Rockridge Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockridge Resources has no effect on the direction of Liontown Resources i.e., Liontown Resources and Rockridge Resources go up and down completely randomly.
Pair Corralation between Liontown Resources and Rockridge Resources
Assuming the 90 days horizon Liontown Resources Limited is expected to under-perform the Rockridge Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Liontown Resources Limited is 2.23 times less risky than Rockridge Resources. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Rockridge Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1.20 in Rockridge Resources on September 2, 2024 and sell it today you would lose (0.10) from holding Rockridge Resources or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Liontown Resources Limited vs. Rockridge Resources
Performance |
| Timeline |
| Liontown Resources |
| Rockridge Resources |
Liontown Resources and Rockridge Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liontown Resources and Rockridge Resources
The main advantage of trading using opposite Liontown Resources and Rockridge Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liontown Resources position performs unexpectedly, Rockridge 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 Rockridge Resources will offset losses from the drop in Rockridge Resources' long position.| Liontown Resources vs. Sayona Mining Limited | Liontown Resources vs. Core Lithium | Liontown Resources vs. Critical Elements | Liontown Resources vs. South32 ADR |
| Rockridge Resources vs. ATT Inc | Rockridge Resources vs. Merck Company | Rockridge Resources vs. Walt Disney | Rockridge Resources vs. Caterpillar |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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