Correlation Between Sayona Mining and Liontown Resources

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

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

Diversification Opportunities for Sayona Mining and Liontown Resources

-0.57

Correlation Coefficient

Sayona Mining  Liontown Resources

Excellent diversification

The 3 months correlation between Sayona and Liontown is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources and Sayona Mining 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 Sayona Mining Limited are associated (or correlated) with Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of Sayona Mining i.e., Sayona Mining and Liontown Resources go up and down completely randomly.

Pair Corralation between Sayona Mining and Liontown Resources

Assuming the 90 days horizon Sayona Mining Limited is expected to under-perform the Liontown Resources. In addition to that, Sayona Mining is 1.94 times more volatile than Liontown Resources Limited. It trades about -0.05 of its total potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.07 per unit of volatility. If you would invest  36.00  in Liontown Resources Limited on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Liontown Resources Limited or generate 13.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Sayona Mining Limited  vs.  Liontown Resources Limited

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.

Liontown Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sayona Mining and Liontown Resources

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

The idea behind Sayona Mining Limited and Liontown Resources 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.