Correlation Between Lake Resources and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Lake Resources and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Dow Jones.
Diversification Opportunities for Lake Resources and Dow Jones
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Dow is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Lake Resources i.e., Lake Resources and Dow Jones go up and down completely randomly.
Pair Corralation between Lake Resources and Dow Jones
Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Dow Jones. In addition to that, Lake Resources is 8.9 times more volatile than Dow Jones Industrial. It trades about -0.2 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of volatility. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lake Resources NL vs. Dow Jones Industrial
Performance |
| Timeline |
Lake Resources and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Lake Resources NL
Pair trading matchups for Lake Resources
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Lake Resources and Dow Jones
The main advantage of trading using opposite Lake Resources and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Lake Resources vs. Acco Brands | Lake Resources vs. Relx PLC ADR | Lake Resources vs. Universal Technical Institute | Lake Resources vs. Afya |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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