Correlation Between Global Energy and Liontown Resources

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

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

Diversification Opportunities for Global Energy and Liontown Resources

-0.3

Correlation Coefficient

Global Energy  Liontown Resources

Very good diversification

The 3 months correlation between Global and Liontown is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Global Energy 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 Global Energy Metals 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 Global Energy i.e., Global Energy and Liontown Resources go up and down completely randomly.

Pair Corralation between Global Energy and Liontown Resources

Assuming the 90 days horizon Global Energy Metals is expected to generate 2.99 times more return on investment than Liontown Resources. However, Global Energy is 2.99 times more volatile than Liontown Resources Limited. It trades about 0.07 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.07 per unit of risk. If you would invest  1.34  in Global Energy Metals on December 30, 2024 and sell it today you would earn a total of  0.13  from holding Global Energy Metals or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Global Energy Metals  vs.  Liontown Resources Limited

Global Energy Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Energy Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Liontown Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Energy and Liontown Resources

The main advantage of trading using opposite Global Energy and Liontown Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Energy 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 Global Energy Metals 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.