Correlation Between Lake Resources and Sayona Mining

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

Diversification Opportunities for Lake Resources and Sayona Mining

0.24

Correlation Coefficient

Lake Resources  Sayona Mining

Modest diversification

The 3 months correlation between Lake and Sayona is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited 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 Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of Lake Resources i.e., Lake Resources and Sayona Mining go up and down completely randomly.

Pair Corralation between Lake Resources and Sayona Mining

Assuming the 90 days horizon Lake Resources NL is expected to generate 0.95 times more return on investment than Sayona Mining. However, Lake Resources NL is 1.05 times less risky than Sayona Mining. It trades about 0.03 of its potential returns per unit of risk. Sayona Mining Limited is currently generating about -0.05 per unit of risk. If you would invest  2.59  in Lake Resources NL on December 28, 2024 and sell it today you would lose (0.17) from holding Lake Resources NL or give up 6.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Lake Resources NL  vs.  Sayona Mining Limited

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.

Sayona Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sayona Mining Limited 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 Sayona Mining

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

The idea behind Lake Resources NL and Sayona Mining Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.