Correlation Between Silver Spruce and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Silver Spruce 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 Silver Spruce and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silver Spruce Resources and Lake Resources NL, you can compare the effects of market volatilities on Silver Spruce 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 Silver Spruce with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Spruce and Lake Resources.
Diversification Opportunities for Silver Spruce and Lake Resources
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Silver and Lake is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Silver Spruce Resources 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 Silver Spruce 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 Silver Spruce Resources 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 Silver Spruce i.e., Silver Spruce and Lake Resources go up and down completely randomly.
Pair Corralation between Silver Spruce and Lake Resources
Assuming the 90 days horizon Silver Spruce Resources is expected to generate 1.57 times more return on investment than Lake Resources. However, Silver Spruce is 1.57 times more volatile than Lake Resources NL. It trades about 0.04 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 1.20 in Silver Spruce Resources on August 31, 2024 and sell it today you would lose (0.81) from holding Silver Spruce Resources or give up 67.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silver Spruce Resources vs. Lake Resources NL
Performance |
| Timeline |
| Silver Spruce Resources |
| Lake Resources NL |
Silver Spruce and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silver Spruce and Lake Resources
The main advantage of trading using opposite Silver Spruce and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Spruce 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.| Silver Spruce vs. South32 Limited | Silver Spruce vs. NioCorp Developments Ltd | Silver Spruce vs. HUMANA INC | Silver Spruce vs. SCOR PK |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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