Correlation Between Liontown Resources and Procter Gamble

Can any of the company-specific risk be diversified away by investing in both Liontown Resources and Procter Gamble 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 Procter Gamble 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 Procter Gamble, you can compare the effects of market volatilities on Liontown Resources and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liontown Resources and Procter Gamble.

Diversification Opportunities for Liontown Resources and Procter Gamble

0.28

Correlation Coefficient

Liontown Resources  Procter Gamble

Modest diversification

The 3 months correlation between Liontown and Procter is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Liontown Resources i.e., Liontown Resources and Procter Gamble go up and down completely randomly.

Pair Corralation between Liontown Resources and Procter Gamble

Assuming the 90 days horizon Liontown Resources Limited is expected to generate 3.4 times more return on investment than Procter Gamble. However, Liontown Resources is 3.4 times more volatile than Procter Gamble. It trades about 0.07 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.02 per unit of risk. If you would invest  36.00  in Liontown Resources Limited on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Liontown Resources Limited or generate 13.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Liontown Resources Limited  vs.  Procter Gamble

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.

Procter Gamble

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Procter Gamble is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liontown Resources and Procter Gamble

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

The idea behind Liontown Resources Limited and Procter Gamble 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 Global Correlations module to find global opportunities by holding instruments from different markets.