Correlation Between Vulcan Minerals and Lake Resources

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

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

Diversification Opportunities for Vulcan Minerals and Lake Resources

0.2

Correlation Coefficient

Vulcan Minerals  Lake Resources

Modest diversification

The 3 months correlation between Vulcan and Lake is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Minerals 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 Vulcan Minerals 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 Vulcan Minerals 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 Vulcan Minerals i.e., Vulcan Minerals and Lake Resources go up and down completely randomly.

Pair Corralation between Vulcan Minerals and Lake Resources

Assuming the 90 days horizon Vulcan Minerals is expected to generate 2.66 times more return on investment than Lake Resources. However, Vulcan Minerals is 2.66 times more volatile than Lake Resources NL. It trades about 0.05 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.01 per unit of risk. If you would invest  14.00  in Vulcan Minerals on October 4, 2024 and sell it today you would lose (8.50) from holding Vulcan Minerals or give up 60.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Vulcan Minerals  vs.  Lake Resources NL

Vulcan Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Vulcan Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lake Resources NL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Resources NL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Lake Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vulcan Minerals and Lake Resources

The main advantage of trading using opposite Vulcan Minerals and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Minerals 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 Vulcan Minerals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.