Correlation Between RLF AgTech and Lake Resources
Can any of the company-specific risk be diversified away by investing in both RLF AgTech 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 RLF AgTech and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLF AgTech and Lake Resources NL, you can compare the effects of market volatilities on RLF AgTech 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 RLF AgTech with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLF AgTech and Lake Resources.
Diversification Opportunities for RLF AgTech and Lake Resources
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RLF and Lake is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding RLF AgTech 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 RLF AgTech 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 RLF AgTech 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 RLF AgTech i.e., RLF AgTech and Lake Resources go up and down completely randomly.
Pair Corralation between RLF AgTech and Lake Resources
Assuming the 90 days trading horizon RLF AgTech is expected to generate 1.19 times more return on investment than Lake Resources. However, RLF AgTech is 1.19 times more volatile than Lake Resources NL. It trades about -0.09 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.43 per unit of risk. If you would invest 5.00 in RLF AgTech on September 5, 2024 and sell it today you would lose (0.40) from holding RLF AgTech or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLF AgTech vs. Lake Resources NL
Performance |
| Timeline |
| RLF AgTech |
| Lake Resources NL |
RLF AgTech and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLF AgTech and Lake Resources
The main advantage of trading using opposite RLF AgTech and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLF AgTech 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.| RLF AgTech vs. Northern Star Resources | RLF AgTech vs. Evolution Mining | RLF AgTech vs. Bluescope Steel | RLF AgTech vs. Sandfire Resources NL |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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