Correlation Between Bravada Gold and Liontown Resources

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

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

Diversification Opportunities for Bravada Gold and Liontown Resources

0.66

Correlation Coefficient

Bravada Gold  Liontown Resources

Poor diversification

The 3 months correlation between Bravada and Liontown is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bravada Gold and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Bravada Gold 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 Bravada Gold 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 Bravada Gold i.e., Bravada Gold and Liontown Resources go up and down completely randomly.

Pair Corralation between Bravada Gold and Liontown Resources

Assuming the 90 days horizon Bravada Gold is expected to generate 2.55 times more return on investment than Liontown Resources. However, Bravada Gold is 2.55 times more volatile than Liontown Resources Limited. It trades about 0.13 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.11 per unit of risk. If you would invest  1.17  in Bravada Gold on December 21, 2024 and sell it today you would earn a total of  0.93  from holding Bravada Gold or generate 79.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bravada Gold  vs.  Liontown Resources Limited

Bravada Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bravada Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bravada Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Liontown Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bravada Gold and Liontown Resources

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

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.