Correlation Between Jervois Mining and Lake Resources

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

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

Diversification Opportunities for Jervois Mining and Lake Resources

0.52

Correlation Coefficient

Jervois Mining  Lake Resources

Very weak diversification

The 3 months correlation between Jervois and Lake is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Jervois 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 Jervois Mining 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 Jervois 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 Jervois Mining i.e., Jervois Mining and Lake Resources go up and down completely randomly.

Pair Corralation between Jervois Mining and Lake Resources

Assuming the 90 days horizon Jervois Mining is expected to generate 1.13 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Jervois Mining is 4.75 times less risky than Lake Resources. It trades about 0.08 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.59  in Lake Resources NL on December 28, 2024 and sell it today you would lose (0.27) from holding Lake Resources NL or give up 10.42% of portfolio value over 90 days.

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

Jervois Mining  vs.  Lake Resources NL

Jervois Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jervois Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Jervois Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lake Resources NL

Risk-Adjusted Performance

Weak

Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak forward-looking signals, Lake Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Jervois Mining and Lake Resources

The main advantage of trading using opposite Jervois Mining and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jervois Mining 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 Jervois 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..