Correlation Between De Grey and Lake Resources

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

By analyzing existing cross correlation between De Grey Mining and Lake Resources NL, you can compare the effects of market volatilities on De Grey 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 De Grey with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and Lake Resources.

Diversification Opportunities for De Grey and Lake Resources

-0.57

Correlation Coefficient

De Grey  Lake Resources

Excellent diversification

The 3 months correlation between DEG and Lake is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining 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 De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Lake Resources go up and down completely randomly.

Pair Corralation between De Grey and Lake Resources

Assuming the 90 days trading horizon De Grey Mining is expected to under-perform the Lake Resources. But the stock apears to be less risky and, when comparing its historical volatility, De Grey Mining is 1.65 times less risky than Lake Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Lake Resources NL is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4.20  in Lake Resources NL on October 10, 2024 and sell it today you would lose (0.10) from holding Lake Resources NL or give up 2.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

De Grey Mining  vs.  Lake Resources NL

De Grey Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lake Resources NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Lake Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with De Grey and Lake Resources

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

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.