Correlation Between Lake Resources and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Lithium Americas 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 Lithium Americas 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 Lithium Americas Corp, you can compare the effects of market volatilities on Lake Resources and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Lithium Americas.
Diversification Opportunities for Lake Resources and Lithium Americas
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Lithium is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Lake Resources i.e., Lake Resources and Lithium Americas go up and down completely randomly.
Pair Corralation between Lake Resources and Lithium Americas
Assuming the 90 days horizon Lake Resources NL is expected to generate 2.1 times more return on investment than Lithium Americas. However, Lake Resources is 2.1 times more volatile than Lithium Americas Corp. It trades about 0.04 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about 0.04 per unit of risk. If you would invest 4.10 in Lake Resources NL on August 24, 2024 and sell it today you would lose (0.70) from holding Lake Resources NL or give up 17.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Resources NL vs. Lithium Americas Corp
Performance |
| Timeline |
| Lake Resources NL |
| Lithium Americas Corp |
Lake Resources and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Lithium Americas
The main advantage of trading using opposite Lake Resources and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.| Lake Resources vs. Mundoro Capital | Lake Resources vs. Norra Metals Corp | Lake Resources vs. Ceylon Graphite Corp | Lake Resources vs. Mason Graphite |
| Lithium Americas vs. Qubec Nickel Corp | Lithium Americas vs. Cypress Development Corp | Lithium Americas vs. Lake Resources NL | Lithium Americas vs. Sayona Mining Limited |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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