Correlation Between Liontown Resources and Placer Creek

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

Diversification Opportunities for Liontown Resources and Placer Creek

0.0

Correlation Coefficient

Liontown Resources  Placer Creek

Pay attention - limited upside

The 3 months correlation between Liontown and Placer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and Placer Creek Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Placer Creek Mining 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 Placer Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Placer Creek Mining has no effect on the direction of Liontown Resources i.e., Liontown Resources and Placer Creek go up and down completely randomly.

Pair Corralation between Liontown Resources and Placer Creek

If you would invest  44.00  in Liontown Resources Limited on August 31, 2024 and sell it today you would earn a total of  6.00  from holding Liontown Resources Limited or generate 13.64% return on investment over 90 days.

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

Liontown Resources Limited  vs.  Placer Creek Mining

Liontown Resources

Risk-Adjusted Performance

5 of 100

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.

Placer Creek Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Placer Creek Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Placer Creek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Liontown Resources and Placer Creek

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

The idea behind Liontown Resources Limited and Placer Creek Mining 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.