Correlation Between Liontown Resources and Mineral Resources
Can any of the company-specific risk be diversified away by investing in both Liontown Resources and Mineral 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 Mineral 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 Mineral Resources Limited, you can compare the effects of market volatilities on Liontown Resources and Mineral 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 Mineral Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and Mineral Resources.
Diversification Opportunities for Liontown Resources and Mineral Resources
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Liontown and Mineral is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Mineral Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral 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 Mineral Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Resources has no effect on the direction of Liontown Resources i.e., Liontown Resources and Mineral Resources go up and down completely randomly.
Pair Corralation between Liontown Resources and Mineral Resources
Assuming the 90 days horizon Liontown Resources Limited is expected to generate 2.67 times more return on investment than Mineral Resources. However, Liontown Resources is 2.67 times more volatile than Mineral Resources Limited. It trades about 0.0 of its potential returns per unit of risk. Mineral Resources Limited is currently generating about -0.05 per unit of risk. If you would invest 111.00 in Liontown Resources Limited on October 20, 2024 and sell it today you would lose (79.00) from holding Liontown Resources Limited or give up 71.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.22% |
| Values | Daily Returns |
Liontown Resources Limited vs. Mineral Resources Limited
Performance |
| Timeline |
| Liontown Resources |
| Mineral Resources |
Liontown Resources and Mineral Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liontown Resources and Mineral Resources
The main advantage of trading using opposite Liontown Resources and Mineral Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liontown Resources position performs unexpectedly, Mineral 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 Mineral Resources will offset losses from the drop in Mineral Resources' long position.| Liontown Resources vs. Rio Tinto Group | Liontown Resources vs. Anglo American plc | Liontown Resources vs. Mineral Resources Limited | Liontown Resources vs. NEXA RESOURCES SA |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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