Correlation Between Lake Resources and Stallion Discoveries

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

Diversification Opportunities for Lake Resources and Stallion Discoveries

LakeStallionDiversified AwayLakeStallionDiversified Away100%
0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lake and Stallion is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Stallion Discoveries Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stallion Discoveries 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 Stallion Discoveries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stallion Discoveries Corp has no effect on the direction of Lake Resources i.e., Lake Resources and Stallion Discoveries go up and down completely randomly.

Pair Corralation between Lake Resources and Stallion Discoveries

Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Stallion Discoveries. But the otc stock apears to be less risky and, when comparing its historical volatility, Lake Resources NL is 1.74 times less risky than Stallion Discoveries. The otc stock trades about -0.03 of its potential returns per unit of risk. The Stallion Discoveries Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2.70  in Stallion Discoveries Corp on November 22, 2024 and sell it today you would lose (0.63) from holding Stallion Discoveries Corp or give up 23.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.33%
ValuesDaily Returns

Lake Resources NL  vs.  Stallion Discoveries Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1001020304050
JavaScript chart by amCharts 3.21.15LLKKF STLNF
       Timeline  
Lake Resources NL 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0250.030.0350.04
Stallion Discoveries Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Stallion Discoveries Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stallion Discoveries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0150.020.0250.030.0350.040.045

Lake Resources and Stallion Discoveries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.74-7.29-4.85-2.4-0.0392.264.66.949.2811.63 0.0040.0050.0060.0070.0080.0090.0100.011
JavaScript chart by amCharts 3.21.15LLKKF STLNF
       Returns  

Pair Trading with Lake Resources and Stallion Discoveries

The main advantage of trading using opposite Lake Resources and Stallion Discoveries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, Stallion Discoveries 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 Stallion Discoveries will offset losses from the drop in Stallion Discoveries' long position.
The idea behind Lake Resources NL and Stallion Discoveries Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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