Correlation Between Lake Resources and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Liontown 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 Lake Resources and Liontown Resources 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 Liontown Resources Limited, you can compare the effects of market volatilities on Lake Resources and Liontown 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 Lake Resources with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Liontown Resources.
Diversification Opportunities for Lake Resources and Liontown Resources
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Liontown is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources 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 Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of Lake Resources i.e., Lake Resources and Liontown Resources go up and down completely randomly.
Pair Corralation between Lake Resources and Liontown Resources
Assuming the 90 days horizon Lake Resources NL is expected to generate 1.69 times more return on investment than Liontown Resources. However, Lake Resources is 1.69 times more volatile than Liontown Resources Limited. It trades about 0.0 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about -0.01 per unit of risk. If you would invest 8.00 in Lake Resources NL on September 2, 2024 and sell it today you would lose (5.00) from holding Lake Resources NL or give up 62.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Resources NL vs. Liontown Resources Limited
Performance |
| Timeline |
| Lake Resources NL |
| Liontown Resources |
Lake Resources and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Liontown Resources
The main advantage of trading using opposite Lake Resources and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Liontown 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 Liontown Resources will offset losses from the drop in Liontown Resources' long position.| Lake Resources vs. Eldorado Gold Corp | Lake Resources vs. BCE Inc | Lake Resources vs. Western Digital | Lake Resources vs. Stratasys |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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