Correlation Between North American and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both North American and Liontown 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 North American and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Liontown Resources Limited, you can compare the effects of market volatilities on North American and Liontown 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 North American with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Liontown Resources.
Diversification Opportunities for North American and Liontown Resources
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between North and Liontown is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and North American 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 North American Construction are associated (or correlated) with Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of North American i.e., North American and Liontown Resources go up and down completely randomly.
Pair Corralation between North American and Liontown Resources
Assuming the 90 days horizon North American is expected to generate 1.1 times less return on investment than Liontown Resources. But when comparing it to its historical volatility, North American Construction is 3.04 times less risky than Liontown Resources. It trades about 0.05 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 99.00 in Liontown Resources Limited on September 5, 2024 and sell it today you would lose (55.00) from holding Liontown Resources Limited or give up 55.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.27% |
| Values | Daily Returns |
North American Construction vs. Liontown Resources Limited
Performance |
| Timeline |
| North American Const |
| Liontown Resources |
North American and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Liontown Resources
The main advantage of trading using opposite North American and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Liontown 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 Liontown Resources will offset losses from the drop in Liontown Resources' long position.| North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech | North American vs. SIVERS SEMICONDUCTORS AB |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |