Correlation Between Lake Resources and Green Technology

Can any of the company-specific risk be diversified away by investing in both Lake Resources and Green Technology 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 Lake Resources and Green Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lake Resources NL and Green Technology Metals, you can compare the effects of market volatilities on Lake Resources and Green Technology 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 Lake Resources with a short position of Green Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Green Technology.

Diversification Opportunities for Lake Resources and Green Technology

-0.35

Correlation Coefficient

Lake Resources  Green Technology

Very good diversification

The 3 months correlation between Lake and Green is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Green Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Technology Metals and Lake 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 Lake Resources NL are associated (or correlated) with Green Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Technology Metals has no effect on the direction of Lake Resources i.e., Lake Resources and Green Technology go up and down completely randomly.

Pair Corralation between Lake Resources and Green Technology

Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Green Technology. But the otc stock apears to be less risky and, when comparing its historical volatility, Lake Resources NL is 1.37 times less risky than Green Technology. The otc stock trades about -0.03 of its potential returns per unit of risk. The Green Technology Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4.81  in Green Technology Metals on November 29, 2024 and sell it today you would earn a total of  2.87  from holding Green Technology Metals or generate 59.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Lake Resources NL  vs.  Green Technology Metals

Lake Resources NL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Green Technology Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Green Technology Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Green Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Resources and Green Technology

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

The idea behind Lake Resources NL and Green Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..