Correlation Between Australian Unity and Liontown Resources

Can any of the company-specific risk be diversified away by investing in both Australian Unity 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 Australian Unity and Liontown Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australian Unity Office and Liontown Resources, you can compare the effects of market volatilities on Australian Unity 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 Australian Unity with a short position of Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Liontown Resources.

Diversification Opportunities for Australian Unity and Liontown Resources

0.0

Correlation Coefficient

Australian Unity  Liontown Resources

Pay attention - limited upside

The 3 months correlation between Australian and Liontown is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Liontown Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Australian Unity 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 Australian Unity Office 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 Australian Unity i.e., Australian Unity and Liontown Resources go up and down completely randomly.

Pair Corralation between Australian Unity and Liontown Resources

Assuming the 90 days trading horizon Australian Unity Office is expected to generate 0.4 times more return on investment than Liontown Resources. However, Australian Unity Office is 2.52 times less risky than Liontown Resources. It trades about 0.01 of its potential returns per unit of risk. Liontown Resources is currently generating about -0.01 per unit of risk. If you would invest  92.00  in Australian Unity Office on December 8, 2024 and sell it today you would lose (4.00) from holding Australian Unity Office or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Australian Unity Office  vs.  Liontown Resources

Australian Unity Office

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Unity Office are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Australian Unity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Liontown Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liontown Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Australian Unity and Liontown Resources

The main advantage of trading using opposite Australian Unity and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity 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.

The idea behind Australian Unity Office and Liontown Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.