Correlation Between Liontown Resources and South32
Can any of the company-specific risk be diversified away by investing in both Liontown Resources and South32 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 South32 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 South32 Limited, you can compare the effects of market volatilities on Liontown Resources and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and South32.
Diversification Opportunities for Liontown Resources and South32
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liontown and South32 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Liontown Resources i.e., Liontown Resources and South32 go up and down completely randomly.
Pair Corralation between Liontown Resources and South32
Assuming the 90 days horizon Liontown Resources Limited is expected to generate 1.54 times more return on investment than South32. However, Liontown Resources is 1.54 times more volatile than South32 Limited. It trades about 0.07 of its potential returns per unit of risk. South32 Limited is currently generating about 0.09 per unit of risk. If you would invest 44.00 in Liontown Resources Limited on September 2, 2024 and sell it today you would earn a total of 7.00 from holding Liontown Resources Limited or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Liontown Resources Limited vs. South32 Limited
Performance |
| Timeline |
| Liontown Resources |
| South32 Limited |
Liontown Resources and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liontown Resources and South32
The main advantage of trading using opposite Liontown Resources and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liontown Resources position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Liontown Resources vs. Sayona Mining Limited | Liontown Resources vs. Core Lithium | Liontown Resources vs. Critical Elements | Liontown Resources vs. South32 ADR |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |