Correlation Between Lake Resources and New Energy
Can any of the company-specific risk be diversified away by investing in both Lake Resources and New Energy 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 New Energy 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 New Energy Metals, you can compare the effects of market volatilities on Lake Resources and New Energy 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 New Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and New Energy.
Diversification Opportunities for Lake Resources and New Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lake and New is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and New Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Energy 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 New Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Energy Metals has no effect on the direction of Lake Resources i.e., Lake Resources and New Energy go up and down completely randomly.
Pair Corralation between Lake Resources and New Energy
Assuming the 90 days horizon Lake Resources NL is expected to generate 0.36 times more return on investment than New Energy. However, Lake Resources NL is 2.76 times less risky than New Energy. It trades about 0.02 of its potential returns per unit of risk. New Energy Metals is currently generating about -0.22 per unit of risk. If you would invest 2.75 in Lake Resources NL on November 22, 2024 and sell it today you would lose (0.05) from holding Lake Resources NL or give up 1.82% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lake Resources NL vs. New Energy Metals
Performance |
Timeline |
Lake Resources NL |
New Energy Metals |
Lake Resources and New Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lake Resources and New Energy
The main advantage of trading using opposite Lake Resources and New Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, New Energy 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 New Energy will offset losses from the drop in New Energy's long position.Lake Resources vs. Montauk Renewables | ||
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Check out your portfolio center.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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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