Correlation Between Lindian Resources and Resource Base

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

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

Diversification Opportunities for Lindian Resources and Resource Base

-0.22

Correlation Coefficient

Lindian Resources  Resource Base

Very good diversification

The 3 months correlation between Lindian and Resource is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lindian Resources and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base and Lindian Resources 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 Lindian Resources are associated (or correlated) with Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Lindian Resources i.e., Lindian Resources and Resource Base go up and down completely randomly.

Pair Corralation between Lindian Resources and Resource Base

Assuming the 90 days trading horizon Lindian Resources is expected to under-perform the Resource Base. In addition to that, Lindian Resources is 1.27 times more volatile than Resource Base. It trades about -0.04 of its total potential returns per unit of risk. Resource Base is currently generating about 0.05 per unit of volatility. If you would invest  3.40  in Resource Base on September 12, 2024 and sell it today you would earn a total of  0.30  from holding Resource Base or generate 8.82% return on investment over 90 days.

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

Lindian Resources  vs.  Resource Base

Lindian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Resource Base

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Resource Base are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Resource Base unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lindian Resources and Resource Base

The main advantage of trading using opposite Lindian Resources and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindian Resources position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.

The idea behind Lindian Resources and Resource Base 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.