Correlation Between Lake Resources and Jervois Mining

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

Diversification Opportunities for Lake Resources and Jervois Mining

-0.11

Correlation Coefficient

Lake Resources  Jervois Mining

Good diversification

The 3 months correlation between Lake and Jervois is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Jervois Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jervois Mining 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 Jervois Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jervois Mining has no effect on the direction of Lake Resources i.e., Lake Resources and Jervois Mining go up and down completely randomly.

Pair Corralation between Lake Resources and Jervois Mining

Assuming the 90 days horizon Lake Resources NL is expected to generate 1.02 times more return on investment than Jervois Mining. However, Lake Resources is 1.02 times more volatile than Jervois Mining. It trades about 0.07 of its potential returns per unit of risk. Jervois Mining is currently generating about 0.06 per unit of risk. If you would invest  2.92  in Lake Resources NL on September 4, 2024 and sell it today you would earn a total of  0.48  from holding Lake Resources NL or generate 16.44% return on investment over 90 days.

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

Lake Resources NL  vs.  Jervois Mining

Lake Resources NL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, Lake Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Jervois Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jervois Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Jervois Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Resources and Jervois Mining

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

The idea behind Lake Resources NL and Jervois 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.