Correlation Between Bravada Gold and Lake Resources

Can any of the company-specific risk be diversified away by investing in both Bravada Gold 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 Bravada Gold and Lake 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 Lake Resources NL, you can compare the effects of market volatilities on Bravada Gold 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 Bravada Gold with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bravada Gold and Lake Resources.

Diversification Opportunities for Bravada Gold and Lake Resources

-0.46

Correlation Coefficient

Bravada Gold  Lake Resources

Very good diversification

The 3 months correlation between Bravada and Lake is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bravada Gold 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 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 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 Bravada Gold i.e., Bravada Gold and Lake Resources go up and down completely randomly.

Pair Corralation between Bravada Gold and Lake Resources

Assuming the 90 days horizon Bravada Gold is expected to generate 1.4 times more return on investment than Lake Resources. However, Bravada Gold is 1.4 times more volatile than Lake Resources NL. It trades about 0.17 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.02 per unit of risk. If you would invest  1.02  in Bravada Gold on December 29, 2024 and sell it today you would earn a total of  1.38  from holding Bravada Gold or generate 135.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bravada Gold  vs.  Lake Resources NL

Bravada Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bravada Gold are ranked lower than 13 (%) 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.

Lake Resources NL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Lake Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bravada Gold and Lake Resources

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

The idea behind Bravada Gold and Lake Resources NL 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.