Correlation Between Embark Education and Lake Resources

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

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

Diversification Opportunities for Embark Education and Lake Resources

-0.05

Correlation Coefficient

Embark Education  Lake Resources

Good diversification

The 3 months correlation between Embark and Lake is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Embark Education Group 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 Embark Education 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 Embark Education Group 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 Embark Education i.e., Embark Education and Lake Resources go up and down completely randomly.

Pair Corralation between Embark Education and Lake Resources

Assuming the 90 days trading horizon Embark Education Group is expected to generate 0.4 times more return on investment than Lake Resources. However, Embark Education Group is 2.51 times less risky than Lake Resources. It trades about 0.06 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.09 per unit of risk. If you would invest  46.00  in Embark Education Group on October 11, 2024 and sell it today you would earn a total of  32.00  from holding Embark Education Group or generate 69.57% return on investment over 90 days.

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

Embark Education Group  vs.  Lake Resources NL

Embark Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Embark Education and Lake Resources

The main advantage of trading using opposite Embark Education and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embark Education 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 Embark Education Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.