Correlation Between MP Materials and Lake Resources
Can any of the company-specific risk be diversified away by investing in both MP Materials 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 MP Materials and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MP Materials Corp and Lake Resources NL, you can compare the effects of market volatilities on MP Materials 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 MP Materials with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MP Materials and Lake Resources.
Diversification Opportunities for MP Materials and Lake Resources
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MP Materials and Lake is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp 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 MP Materials 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 MP Materials Corp 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 MP Materials i.e., MP Materials and Lake Resources go up and down completely randomly.
Pair Corralation between MP Materials and Lake Resources
Allowing for the 90-day total investment horizon MP Materials Corp is expected to generate 0.27 times more return on investment than Lake Resources. However, MP Materials Corp is 3.71 times less risky than Lake Resources. It trades about 0.07 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 1,776 in MP Materials Corp on September 13, 2024 and sell it today you would earn a total of 152.00 from holding MP Materials Corp or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
MP Materials Corp vs. Lake Resources NL
Performance |
| Timeline |
| MP Materials Corp |
| Lake Resources NL |
MP Materials and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MP Materials and Lake Resources
The main advantage of trading using opposite MP Materials and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MP Materials 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.| MP Materials vs. Piedmont Lithium Ltd | MP Materials vs. Sigma Lithium Resources | MP Materials vs. Standard Lithium | MP Materials vs. Vale SA ADR |
| Lake Resources vs. Entegris | Lake Resources vs. EMCOR Group | Lake Resources vs. RBC Bearings Incorporated | Lake Resources vs. MagnaChip Semiconductor |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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