Correlation Between Liontown Resources and STRAITS TRADG

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

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

Diversification Opportunities for Liontown Resources and STRAITS TRADG

0.27

Correlation Coefficient

Liontown Resources  STRAITS TRADG

Modest diversification

The 3 months correlation between Liontown and STRAITS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources Limited and STRAITS TRADG SD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAITS TRADG SD and Liontown Resources 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 Liontown Resources Limited are associated (or correlated) with STRAITS TRADG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAITS TRADG SD has no effect on the direction of Liontown Resources i.e., Liontown Resources and STRAITS TRADG go up and down completely randomly.

Pair Corralation between Liontown Resources and STRAITS TRADG

Assuming the 90 days horizon Liontown Resources Limited is expected to generate 7.92 times more return on investment than STRAITS TRADG. However, Liontown Resources is 7.92 times more volatile than STRAITS TRADG SD. It trades about 0.02 of its potential returns per unit of risk. STRAITS TRADG SD is currently generating about 0.05 per unit of risk. If you would invest  73.00  in Liontown Resources Limited on September 3, 2024 and sell it today you would lose (27.00) from holding Liontown Resources Limited or give up 36.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Liontown Resources Limited  vs.  STRAITS TRADG SD

Liontown Resources

Risk-Adjusted Performance

5 of 100

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 uncertain basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

STRAITS TRADG SD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAITS TRADG SD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, STRAITS TRADG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Liontown Resources and STRAITS TRADG

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

The idea behind Liontown Resources Limited and STRAITS TRADG SD 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .