Correlation Between Sayona Mining and Lake Resources

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

Diversification Opportunities for Sayona Mining and Lake Resources

0.46

Correlation Coefficient

Sayona Mining  Lake Resources

Very weak diversification

The 3 months correlation between Sayona and Lake is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited 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 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 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 Sayona Mining i.e., Sayona Mining and Lake Resources go up and down completely randomly.

Pair Corralation between Sayona Mining and Lake Resources

Assuming the 90 days horizon Sayona Mining is expected to generate 1.21 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Sayona Mining Limited is 1.48 times less risky than Lake Resources. It trades about 0.08 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.92  in Lake Resources NL on September 4, 2024 and sell it today you would earn a total of  0.48  from holding Lake Resources NL or generate 16.44% return on investment over 90 days.

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

Sayona Mining Limited  vs.  Lake Resources NL

Sayona Mining Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sayona Mining Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sayona Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Lake Resources NL

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Sayona Mining and Lake Resources

The main advantage of trading using opposite Sayona Mining and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sayona Mining 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 Sayona Mining Limited 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.