Correlation Between Sphere Entertainment and Lake Resources

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

By analyzing existing cross correlation between Sphere Entertainment Co and Lake Resources NL, you can compare the effects of market volatilities on Sphere Entertainment and Lake Resources 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 Sphere Entertainment with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Lake Resources.

Diversification Opportunities for Sphere Entertainment and Lake Resources

0.25

Correlation Coefficient

Sphere Entertainment  Lake Resources

Modest diversification

The 3 months correlation between Sphere and Lake is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Lake Resources go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Lake Resources

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Lake Resources. But the stock apears to be less risky and, when comparing its historical volatility, Sphere Entertainment Co is 2.69 times less risky than Lake Resources. The stock trades about -0.08 of its potential returns per unit of risk. The Lake Resources NL is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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

Sphere Entertainment Co  vs.  Lake Resources NL

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Sphere Entertainment and Lake Resources

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

The idea behind Sphere Entertainment Co and Lake Resources NL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..