Correlation Between Lake Resources and Nevada Sunrise
Can any of the company-specific risk be diversified away by investing in both Lake Resources and Nevada Sunrise 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 Nevada Sunrise 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 Nevada Sunrise Gold, you can compare the effects of market volatilities on Lake Resources and Nevada Sunrise 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 Nevada Sunrise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Nevada Sunrise.
Diversification Opportunities for Lake Resources and Nevada Sunrise
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lake and Nevada is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Nevada Sunrise Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada Sunrise Gold 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 Nevada Sunrise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada Sunrise Gold has no effect on the direction of Lake Resources i.e., Lake Resources and Nevada Sunrise go up and down completely randomly.
Pair Corralation between Lake Resources and Nevada Sunrise
Assuming the 90 days horizon Lake Resources is expected to generate 3.24 times less return on investment than Nevada Sunrise. In addition to that, Lake Resources is 1.79 times more volatile than Nevada Sunrise Gold. It trades about 0.02 of its total potential returns per unit of risk. Nevada Sunrise Gold is currently generating about 0.11 per unit of volatility. If you would invest 1.00 in Nevada Sunrise Gold on November 22, 2024 and sell it today you would earn a total of 0.08 from holding Nevada Sunrise Gold or generate 8.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lake Resources NL vs. Nevada Sunrise Gold
Performance |
Timeline |
Lake Resources NL |
Nevada Sunrise Gold |
Lake Resources and Nevada Sunrise Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lake Resources and Nevada Sunrise
The main advantage of trading using opposite Lake Resources and Nevada Sunrise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Nevada Sunrise 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 Nevada Sunrise will offset losses from the drop in Nevada Sunrise'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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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