Correlation Between Lykos Metals and Wesfarmers

Can any of the company-specific risk be diversified away by investing in both Lykos Metals and Wesfarmers 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 Lykos Metals and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lykos Metals and Wesfarmers, you can compare the effects of market volatilities on Lykos Metals and Wesfarmers 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 Lykos Metals with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lykos Metals and Wesfarmers.

Diversification Opportunities for Lykos Metals and Wesfarmers

-0.43

Correlation Coefficient

Lykos Metals  Wesfarmers

Very good diversification

The 3 months correlation between Lykos and Wesfarmers is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lykos Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Lykos Metals 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 Lykos Metals are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of Lykos Metals i.e., Lykos Metals and Wesfarmers go up and down completely randomly.

Pair Corralation between Lykos Metals and Wesfarmers

Assuming the 90 days trading horizon Lykos Metals is expected to under-perform the Wesfarmers. In addition to that, Lykos Metals is 3.23 times more volatile than Wesfarmers. It trades about -0.09 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.01 per unit of volatility. If you would invest  7,069  in Wesfarmers on December 24, 2024 and sell it today you would earn a total of  15.00  from holding Wesfarmers or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lykos Metals  vs.  Wesfarmers

Lykos Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lykos Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Wesfarmers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wesfarmers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wesfarmers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lykos Metals and Wesfarmers

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

The idea behind Lykos Metals and Wesfarmers 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.