Correlation Between Lake Resources and Farm Pride
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Farm Pride 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 Lake Resources and Farm Pride into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Resources NL and Farm Pride Foods, you can compare the effects of market volatilities on Lake Resources and Farm Pride 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 Lake Resources with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Farm Pride.
Diversification Opportunities for Lake Resources and Farm Pride
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lake and Farm is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods and Lake 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 Lake Resources NL are associated (or correlated) with Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of Lake Resources i.e., Lake Resources and Farm Pride go up and down completely randomly.
Pair Corralation between Lake Resources and Farm Pride
Assuming the 90 days trading horizon Lake Resources NL is expected to generate 1.19 times more return on investment than Farm Pride. However, Lake Resources is 1.19 times more volatile than Farm Pride Foods. It trades about 0.05 of its potential returns per unit of risk. Farm Pride Foods is currently generating about 0.05 per unit of risk. If you would invest 4.00 in Lake Resources NL on September 3, 2024 and sell it today you would earn a total of 0.40 from holding Lake Resources NL or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Resources NL vs. Farm Pride Foods
Performance |
| Timeline |
| Lake Resources NL |
| Farm Pride Foods |
Lake Resources and Farm Pride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Farm Pride
The main advantage of trading using opposite Lake Resources and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Farm Pride 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 Farm Pride will offset losses from the drop in Farm Pride's long position.| Lake Resources vs. Farm Pride Foods | Lake Resources vs. Embark Education Group | Lake Resources vs. Hutchison Telecommunications | Lake Resources vs. IDP Education |
| Farm Pride vs. Cooper Metals | Farm Pride vs. OD6 Metals | Farm Pride vs. SportsHero | Farm Pride vs. Champion Iron |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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