Correlation Between Lake Resources and Pure Energy
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Pure Energy 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 Pure Energy 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 Pure Energy Minerals, you can compare the effects of market volatilities on Lake Resources and Pure Energy 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 Pure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Pure Energy.
Diversification Opportunities for Lake Resources and Pure Energy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lake and Pure is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals 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 Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of Lake Resources i.e., Lake Resources and Pure Energy go up and down completely randomly.
Pair Corralation between Lake Resources and Pure Energy
Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Pure Energy. But the otc stock apears to be less risky and, when comparing its historical volatility, Lake Resources NL is 1.02 times less risky than Pure Energy. The otc stock trades about -0.04 of its potential returns per unit of risk. The Pure Energy Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Pure Energy Minerals on September 3, 2024 and sell it today you would lose (21.00) from holding Pure Energy Minerals or give up 48.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Resources NL vs. Pure Energy Minerals
Performance |
| Timeline |
| Lake Resources NL |
| Pure Energy Minerals |
Lake Resources and Pure Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Pure Energy
The main advantage of trading using opposite Lake Resources and Pure Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Pure Energy 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 Pure Energy will offset losses from the drop in Pure Energy's long position.| Lake Resources vs. Sphere Entertainment Co | Lake Resources vs. IPG Photonics | Lake Resources vs. Summit Materials | Lake Resources vs. Pinterest |
| Pure Energy vs. Spearmint Resources | Pure Energy vs. Cruz Cobalt Corp | Pure Energy vs. ioneer | Pure Energy vs. Argosy Minerals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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