Correlation Between Lake Resources and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Nova Lithium 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 Nova Lithium 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 Nova Lithium Corp, you can compare the effects of market volatilities on Lake Resources and Nova Lithium 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 Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Nova Lithium.
Diversification Opportunities for Lake Resources and Nova Lithium
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Nova is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Nova Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lithium Corp 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 Nova Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lithium Corp has no effect on the direction of Lake Resources i.e., Lake Resources and Nova Lithium go up and down completely randomly.
Pair Corralation between Lake Resources and Nova Lithium
Assuming the 90 days horizon Lake Resources NL is expected to generate 0.8 times more return on investment than Nova Lithium. However, Lake Resources NL is 1.24 times less risky than Nova Lithium. It trades about 0.01 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about -0.05 per unit of risk. If you would invest 2.63 in Lake Resources NL on December 27, 2024 and sell it today you would lose (0.38) from holding Lake Resources NL or give up 14.45% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Lake Resources NL vs. Nova Lithium Corp
Performance |
Timeline |
Lake Resources NL |
Nova Lithium Corp |
Lake Resources and Nova Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lake Resources and Nova Lithium
The main advantage of trading using opposite Lake Resources and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Nova Lithium 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 Nova Lithium will offset losses from the drop in Nova Lithium's long position.Lake Resources vs. Mayfair Gold Corp | Lake Resources vs. LAir Liquide SA | Lake Resources vs. Joby Aviation | Lake Resources vs. RBC Bearings Incorporated |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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