Correlation Between Liontown Resources and York Harbour

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

Diversification Opportunities for Liontown Resources and York Harbour

0.07

Correlation Coefficient

Liontown Resources  York Harbour

Significant diversification

The 3 months correlation between Liontown and York is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and York Harbour Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Harbour Metals 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 York Harbour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Harbour Metals has no effect on the direction of Liontown Resources i.e., Liontown Resources and York Harbour go up and down completely randomly.

Pair Corralation between Liontown Resources and York Harbour

Assuming the 90 days horizon Liontown Resources Limited is expected to under-perform the York Harbour. But the pink sheet apears to be less risky and, when comparing its historical volatility, Liontown Resources Limited is 3.37 times less risky than York Harbour. The pink sheet trades about -0.03 of its potential returns per unit of risk. The York Harbour Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5.62  in York Harbour Metals on December 1, 2024 and sell it today you would lose (2.57) from holding York Harbour Metals or give up 45.73% of portfolio value over 90 days.

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

Liontown Resources Limited  vs.  York Harbour Metals

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

York Harbour Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Liontown Resources and York Harbour

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

The idea behind Liontown Resources Limited and York Harbour Metals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.