Correlation Between Lake Resources and Piedmont Lithium
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Piedmont Lithium 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 Piedmont Lithium 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 Piedmont Lithium Ltd, you can compare the effects of market volatilities on Lake Resources and Piedmont Lithium 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 Piedmont Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Piedmont Lithium.
Diversification Opportunities for Lake Resources and Piedmont Lithium
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Piedmont is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Piedmont Lithium Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium 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 Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Lake Resources i.e., Lake Resources and Piedmont Lithium go up and down completely randomly.
Pair Corralation between Lake Resources and Piedmont Lithium
Assuming the 90 days horizon Lake Resources NL is expected to generate 1.62 times more return on investment than Piedmont Lithium. However, Lake Resources is 1.62 times more volatile than Piedmont Lithium Ltd. It trades about -0.02 of its potential returns per unit of risk. Piedmont Lithium Ltd is currently generating about -0.06 per unit of risk. If you would invest 19.00 in Lake Resources NL on September 12, 2024 and sell it today you would lose (16.50) from holding Lake Resources NL or give up 86.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Lake Resources NL vs. Piedmont Lithium Ltd
Performance |
| Timeline |
| Lake Resources NL |
| Piedmont Lithium |
Lake Resources and Piedmont Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Resources and Piedmont Lithium
The main advantage of trading using opposite Lake Resources and Piedmont Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Piedmont Lithium 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 Piedmont Lithium will offset losses from the drop in Piedmont Lithium's long position.| Lake Resources vs. Qubec Nickel Corp | Lake Resources vs. IGO Limited | Lake Resources vs. Focus Graphite | Lake Resources vs. Mineral Res |
| Piedmont Lithium vs. Sigma Lithium Resources | Piedmont Lithium vs. Standard Lithium | Piedmont Lithium vs. MP Materials Corp | Piedmont Lithium vs. Vale SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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