Correlation Between Standard Lithium and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Standard Lithium 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 Standard Lithium and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Lithium and Lake Resources NL, you can compare the effects of market volatilities on Standard Lithium 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 Standard Lithium with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Lithium and Lake Resources.
Diversification Opportunities for Standard Lithium and Lake Resources
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and Lake is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Standard Lithium 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 Standard Lithium 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 Standard Lithium 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 Standard Lithium i.e., Standard Lithium and Lake Resources go up and down completely randomly.
Pair Corralation between Standard Lithium and Lake Resources
Considering the 90-day investment horizon Standard Lithium is expected to generate 0.59 times more return on investment than Lake Resources. However, Standard Lithium is 1.7 times less risky than Lake Resources. It trades about -0.17 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.16 per unit of risk. If you would invest 196.00 in Standard Lithium on September 13, 2024 and sell it today you would lose (34.00) from holding Standard Lithium or give up 17.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Standard Lithium vs. Lake Resources NL
Performance |
| Timeline |
| Standard Lithium |
| Lake Resources NL |
Standard Lithium and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Lithium and Lake Resources
The main advantage of trading using opposite Standard Lithium and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Lithium 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.| Standard Lithium vs. MP Materials Corp | Standard Lithium vs. NioCorp Developments Ltd | Standard Lithium vs. Vale SA ADR | Standard Lithium vs. Vizsla Resources Corp |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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