Correlation Between Freegold Ventures and Liontown Resources

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

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

Diversification Opportunities for Freegold Ventures and Liontown Resources

0.78

Correlation Coefficient

Freegold Ventures  Liontown Resources

Poor diversification

The 3 months correlation between Freegold and Liontown is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Freegold Ventures Limited and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Freegold Ventures 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 Freegold Ventures Limited 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 Freegold Ventures i.e., Freegold Ventures and Liontown Resources go up and down completely randomly.

Pair Corralation between Freegold Ventures and Liontown Resources

Assuming the 90 days horizon Freegold Ventures Limited is expected to generate 1.39 times more return on investment than Liontown Resources. However, Freegold Ventures is 1.39 times more volatile than Liontown Resources Limited. It trades about 0.21 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.26 per unit of risk. If you would invest  50.00  in Freegold Ventures Limited on October 27, 2024 and sell it today you would earn a total of  11.00  from holding Freegold Ventures Limited or generate 22.0% return on investment over 90 days.

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

Freegold Ventures Limited  vs.  Liontown Resources Limited

Freegold Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freegold Ventures Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Liontown Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liontown Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Freegold Ventures and Liontown Resources

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

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..