Correlation Between Lake Resources and Huntsman Exploration

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

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

Diversification Opportunities for Lake Resources and Huntsman Exploration

0.44

Correlation Coefficient

Lake Resources  Huntsman Exploration

Very weak diversification

The 3 months correlation between Lake and Huntsman is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration and Lake 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 Lake Resources NL are associated (or correlated) with Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Lake Resources i.e., Lake Resources and Huntsman Exploration go up and down completely randomly.

Pair Corralation between Lake Resources and Huntsman Exploration

Assuming the 90 days horizon Lake Resources NL is expected to generate 0.73 times more return on investment than Huntsman Exploration. However, Lake Resources NL is 1.38 times less risky than Huntsman Exploration. It trades about -0.12 of its potential returns per unit of risk. Huntsman Exploration is currently generating about -0.3 per unit of risk. If you would invest  3.29  in Lake Resources NL on September 23, 2024 and sell it today you would lose (0.57) from holding Lake Resources NL or give up 17.33% of portfolio value over 90 days.

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

Lake Resources NL  vs.  Huntsman Exploration

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 conflicting forward-looking signals, Lake Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Huntsman Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntsman Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lake Resources and Huntsman Exploration

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

The idea behind Lake Resources NL and Huntsman Exploration 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.