Correlation Between Lake Resources and Silver Spruce

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

Diversification Opportunities for Lake Resources and Silver Spruce

0.04

Correlation Coefficient

Lake Resources  Silver Spruce

Significant diversification

The 3 months correlation between Lake and Silver is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Silver Spruce Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Spruce Resources 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 Silver Spruce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Spruce Resources has no effect on the direction of Lake Resources i.e., Lake Resources and Silver Spruce go up and down completely randomly.

Pair Corralation between Lake Resources and Silver Spruce

Assuming the 90 days horizon Lake Resources is expected to generate 7.41 times less return on investment than Silver Spruce. But when comparing it to its historical volatility, Lake Resources NL is 2.17 times less risky than Silver Spruce. It trades about 0.03 of its potential returns per unit of risk. Silver Spruce Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Silver Spruce Resources on December 28, 2024 and sell it today you would earn a total of  0.06  from holding Silver Spruce Resources or generate 15.79% return on investment over 90 days.

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

Lake Resources NL  vs.  Silver Spruce Resources

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 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward-looking signals, Lake Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Silver Spruce Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Spruce Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Silver Spruce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Resources and Silver Spruce

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

The idea behind Lake Resources NL and Silver Spruce Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.