Correlation Between Lake Resources and Patriot Battery

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

Diversification Opportunities for Lake Resources and Patriot Battery

0.5

Correlation Coefficient

Lake Resources  Patriot Battery

Very weak diversification

The 3 months correlation between Lake and Patriot is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Lake Resources i.e., Lake Resources and Patriot Battery go up and down completely randomly.

Pair Corralation between Lake Resources and Patriot Battery

Assuming the 90 days horizon Lake Resources NL is expected to generate 1.99 times more return on investment than Patriot Battery. However, Lake Resources is 1.99 times more volatile than Patriot Battery Metals. It trades about 0.02 of its potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.08 per unit of risk. If you would invest  2.59  in Lake Resources NL on December 29, 2024 and sell it today you would lose (0.27) from holding Lake Resources NL or give up 10.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Lake Resources NL  vs.  Patriot Battery Metals

Lake Resources NL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Lake Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Patriot Battery Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Patriot Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lake Resources and Patriot Battery

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

The idea behind Lake Resources NL and Patriot Battery 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.