Correlation Between Fathom Nickel and Liontown Resources

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

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

Diversification Opportunities for Fathom Nickel and Liontown Resources

0.09

Correlation Coefficient

Fathom Nickel  Liontown Resources

Significant diversification

The 3 months correlation between Fathom and Liontown is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fathom Nickel and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Fathom Nickel 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 Fathom Nickel 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 Fathom Nickel i.e., Fathom Nickel and Liontown Resources go up and down completely randomly.

Pair Corralation between Fathom Nickel and Liontown Resources

Assuming the 90 days horizon Fathom Nickel is expected to generate 1.76 times more return on investment than Liontown Resources. However, Fathom Nickel is 1.76 times more volatile than Liontown Resources Limited. It trades about 0.03 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about -0.1 per unit of risk. If you would invest  2.20  in Fathom Nickel on November 29, 2024 and sell it today you would lose (0.11) from holding Fathom Nickel or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Fathom Nickel  vs.  Liontown Resources Limited

Fathom Nickel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fathom Nickel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Fathom Nickel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Liontown Resources

Risk-Adjusted Performance

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fathom Nickel and Liontown Resources

The main advantage of trading using opposite Fathom Nickel and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fathom Nickel 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 Fathom Nickel 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.