Correlation Between Liontown Resources and DevEx Resources

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

Diversification Opportunities for Liontown Resources and DevEx Resources

0.58

Correlation Coefficient

Liontown Resources  DevEx Resources

Very weak diversification

The 3 months correlation between Liontown and DevEx is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and DevEx Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DevEx 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 DevEx Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DevEx Resources has no effect on the direction of Liontown Resources i.e., Liontown Resources and DevEx Resources go up and down completely randomly.

Pair Corralation between Liontown Resources and DevEx Resources

Assuming the 90 days horizon Liontown Resources Limited is expected to generate 0.65 times more return on investment than DevEx Resources. However, Liontown Resources Limited is 1.54 times less risky than DevEx Resources. It trades about -0.36 of its potential returns per unit of risk. DevEx Resources Limited is currently generating about -0.26 per unit of risk. If you would invest  46.00  in Liontown Resources Limited on September 23, 2024 and sell it today you would lose (16.00) from holding Liontown Resources Limited or give up 34.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Liontown Resources Limited  vs.  DevEx Resources Limited

Liontown Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liontown Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DevEx Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DevEx 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Liontown Resources and DevEx Resources

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

The idea behind Liontown Resources Limited and DevEx Resources Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.