Correlation Between O3 Mining and Liontown Resources
Can any of the company-specific risk be diversified away by investing in both O3 Mining 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 O3 Mining and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between O3 Mining and Liontown Resources Limited, you can compare the effects of market volatilities on O3 Mining 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 O3 Mining with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of O3 Mining and Liontown Resources.
Diversification Opportunities for O3 Mining and Liontown Resources
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between OIIIF and Liontown is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding O3 Mining and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and O3 Mining 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 O3 Mining 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 O3 Mining i.e., O3 Mining and Liontown Resources go up and down completely randomly.
Pair Corralation between O3 Mining and Liontown Resources
Assuming the 90 days horizon O3 Mining is expected to generate 0.54 times more return on investment than Liontown Resources. However, O3 Mining is 1.84 times less risky than Liontown Resources. It trades about -0.02 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about -0.1 per unit of risk. If you would invest 78.00 in O3 Mining on September 3, 2024 and sell it today you would lose (1.00) from holding O3 Mining or give up 1.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
O3 Mining vs. Liontown Resources Limited
Performance |
| Timeline |
| O3 Mining |
| Liontown Resources |
O3 Mining and Liontown Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with O3 Mining and Liontown Resources
The main advantage of trading using opposite O3 Mining and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if O3 Mining 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.| O3 Mining vs. Canstar Resources | O3 Mining vs. Benton Resources | O3 Mining vs. Prime Mining Corp | O3 Mining vs. Silver X Mining |
| Liontown Resources vs. Sayona Mining Limited | Liontown Resources vs. Core Lithium | Liontown Resources vs. Critical Elements | Liontown Resources vs. South32 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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