Correlation Between Magellan Financial and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Magellan Financial 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 Magellan Financial and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magellan Financial Group and Lake Resources NL, you can compare the effects of market volatilities on Magellan Financial 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 Magellan Financial with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Lake Resources.
Diversification Opportunities for Magellan Financial and Lake Resources
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magellan and Lake is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group 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 Magellan Financial 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 Magellan Financial Group 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 Magellan Financial i.e., Magellan Financial and Lake Resources go up and down completely randomly.
Pair Corralation between Magellan Financial and Lake Resources
Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 0.48 times more return on investment than Lake Resources. However, Magellan Financial Group is 2.08 times less risky than Lake Resources. It trades about 0.04 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.09 per unit of risk. If you would invest 783.00 in Magellan Financial Group on September 5, 2024 and sell it today you would earn a total of 344.00 from holding Magellan Financial Group or generate 43.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Lake Resources NL
Performance |
| Timeline |
| Magellan Financial |
| Lake Resources NL |
Magellan Financial and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Lake Resources
The main advantage of trading using opposite Magellan Financial and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial 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.| Magellan Financial vs. Westpac Banking | Magellan Financial vs. Ecofibre | Magellan Financial vs. Adriatic Metals Plc | Magellan Financial vs. Australian Dairy Farms |
| Lake Resources vs. Hutchison Telecommunications | Lake Resources vs. Commonwealth Bank of | Lake Resources vs. EMvision Medical Devices | Lake Resources vs. Magellan Financial Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |