Correlation Between Liontown Resources and GREEN MINERALS

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

Diversification Opportunities for Liontown Resources and GREEN MINERALS

0.33

Correlation Coefficient

Liontown Resources  GREEN MINERALS

Weak diversification

The 3 months correlation between Liontown and GREEN is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and GREEN MINERALS NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREEN MINERALS NK 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 GREEN MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREEN MINERALS NK has no effect on the direction of Liontown Resources i.e., Liontown Resources and GREEN MINERALS go up and down completely randomly.

Pair Corralation between Liontown Resources and GREEN MINERALS

Assuming the 90 days horizon Liontown Resources Limited is expected to generate 1.2 times more return on investment than GREEN MINERALS. However, Liontown Resources is 1.2 times more volatile than GREEN MINERALS NK. It trades about 0.09 of its potential returns per unit of risk. GREEN MINERALS NK is currently generating about 0.01 per unit of risk. If you would invest  30.00  in Liontown Resources Limited on December 22, 2024 and sell it today you would earn a total of  8.00  from holding Liontown Resources Limited or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Liontown Resources Limited  vs.  GREEN MINERALS NK

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 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

GREEN MINERALS NK

Risk-Adjusted Performance

Very Weak

Over the last 90 days GREEN MINERALS NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GREEN MINERALS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liontown Resources and GREEN MINERALS

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

The idea behind Liontown Resources Limited and GREEN MINERALS NK 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.