Correlation Between MFF Capital and Lake Resources
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Lake 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 MFF Capital and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Lake Resources NL, you can compare the effects of market volatilities on MFF Capital and Lake 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 MFF Capital with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Lake Resources.
Diversification Opportunities for MFF Capital and Lake Resources
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MFF and Lake is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL and MFF Capital 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 MFF Capital Investments are associated (or correlated) with Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of MFF Capital i.e., MFF Capital and Lake Resources go up and down completely randomly.
Pair Corralation between MFF Capital and Lake Resources
Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.24 times more return on investment than Lake Resources. However, MFF Capital Investments is 4.23 times less risky than Lake Resources. It trades about 0.14 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.01 per unit of risk. If you would invest 357.00 in MFF Capital Investments on September 3, 2024 and sell it today you would earn a total of 78.00 from holding MFF Capital Investments or generate 21.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFF Capital Investments vs. Lake Resources NL
Performance |
| Timeline |
| MFF Capital Investments |
| Lake Resources NL |
MFF Capital and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Lake Resources
The main advantage of trading using opposite MFF Capital and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Lake 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 Lake Resources will offset losses from the drop in Lake Resources' long position.| MFF Capital vs. Mirrabooka Investments | MFF Capital vs. Carlton Investments | MFF Capital vs. Australian United Investment | MFF Capital vs. Platinum Asia Investments |
| Lake Resources vs. Farm Pride Foods | Lake Resources vs. Embark Education Group | Lake Resources vs. Hutchison Telecommunications | Lake Resources vs. IDP Education |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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