Correlation Between Liontown Resources and Metals Creek

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

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

Diversification Opportunities for Liontown Resources and Metals Creek

0.13

Correlation Coefficient

Liontown Resources  Metals Creek

Average diversification

The 3 months correlation between Liontown and Metals is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Metals Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Creek Resources and Liontown 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 Liontown Resources Limited are associated (or correlated) with Metals Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Creek Resources has no effect on the direction of Liontown Resources i.e., Liontown Resources and Metals Creek go up and down completely randomly.

Pair Corralation between Liontown Resources and Metals Creek

Assuming the 90 days horizon Liontown Resources Limited is expected to under-perform the Metals Creek. But the pink sheet apears to be less risky and, when comparing its historical volatility, Liontown Resources Limited is 5.81 times less risky than Metals Creek. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Metals Creek Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Metals Creek Resources on November 29, 2024 and sell it today you would lose (1.00) from holding Metals Creek Resources or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Liontown Resources Limited  vs.  Metals Creek Resources

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.

Metals Creek Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Creek Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Metals Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liontown Resources and Metals Creek

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

The idea behind Liontown Resources Limited and Metals Creek Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.