Correlation Between DevEx Resources and Rock Tech

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

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

Diversification Opportunities for DevEx Resources and Rock Tech

0.69

Correlation Coefficient

DevEx Resources  Rock Tech

Poor diversification

The 3 months correlation between DevEx and Rock is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding DevEx Resources Limited and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and DevEx Resources 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 DevEx Resources Limited are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of DevEx Resources i.e., DevEx Resources and Rock Tech go up and down completely randomly.

Pair Corralation between DevEx Resources and Rock Tech

Assuming the 90 days horizon DevEx Resources is expected to generate 1.79 times less return on investment than Rock Tech. In addition to that, DevEx Resources is 1.94 times more volatile than Rock Tech Lithium. It trades about 0.07 of its total potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.25 per unit of volatility. If you would invest  68.00  in Rock Tech Lithium on October 10, 2024 and sell it today you would earn a total of  21.00  from holding Rock Tech Lithium or generate 30.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

DevEx Resources Limited  vs.  Rock Tech Lithium

DevEx Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DevEx Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DevEx Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Rock Tech Lithium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rock Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DevEx Resources and Rock Tech

The main advantage of trading using opposite DevEx Resources and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DevEx Resources position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.

The idea behind DevEx Resources Limited and Rock Tech Lithium 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.