Correlation Between Pilbara Minerals and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Pilbara Minerals 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 Pilbara Minerals and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pilbara Minerals Limited and Lake Resources NL, you can compare the effects of market volatilities on Pilbara Minerals 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 Pilbara Minerals with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilbara Minerals and Lake Resources.
Diversification Opportunities for Pilbara Minerals and Lake Resources
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pilbara and Lake is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited 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 Pilbara Minerals 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 Pilbara Minerals Limited 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 Pilbara Minerals i.e., Pilbara Minerals and Lake Resources go up and down completely randomly.
Pair Corralation between Pilbara Minerals and Lake Resources
Assuming the 90 days horizon Pilbara Minerals Limited is expected to generate 0.44 times more return on investment than Lake Resources. However, Pilbara Minerals Limited is 2.27 times less risky than Lake Resources. It trades about -0.01 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.04 per unit of risk. If you would invest 254.00 in Pilbara Minerals Limited on August 31, 2024 and sell it today you would lose (94.00) from holding Pilbara Minerals Limited or give up 37.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pilbara Minerals Limited vs. Lake Resources NL
Performance |
| Timeline |
| Pilbara Minerals |
| Lake Resources NL |
Pilbara Minerals and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pilbara Minerals and Lake Resources
The main advantage of trading using opposite Pilbara Minerals and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilbara Minerals 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.| Pilbara Minerals vs. South32 Limited | Pilbara Minerals vs. Grupo Mxico SAB | Pilbara Minerals vs. Critical Elements | Pilbara Minerals vs. Jourdan Resources |
| Lake Resources vs. Liontown Resources Limited | Lake Resources vs. ATT Inc | Lake Resources vs. Merck Company | Lake Resources vs. Walt Disney |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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