Correlation Between Lake Resources and Blue Moon

Can any of the company-specific risk be diversified away by investing in both Lake Resources and Blue Moon 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 Blue Moon 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 Blue Moon Metals, you can compare the effects of market volatilities on Lake Resources and Blue Moon 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 Blue Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and Blue Moon.

Diversification Opportunities for Lake Resources and Blue Moon

0.26

Correlation Coefficient

Lake Resources  Blue Moon

Modest diversification

The 3 months correlation between Lake and Blue is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Metals 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of Lake Resources i.e., Lake Resources and Blue Moon go up and down completely randomly.

Pair Corralation between Lake Resources and Blue Moon

Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Blue Moon. But the otc stock apears to be less risky and, when comparing its historical volatility, Lake Resources NL is 1.48 times less risky than Blue Moon. The otc stock trades about -0.01 of its potential returns per unit of risk. The Blue Moon Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.95  in Blue Moon Metals on September 23, 2024 and sell it today you would earn a total of  21.05  from holding Blue Moon Metals or generate 532.91% return on investment over 90 days.

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

Lake Resources NL  vs.  Blue Moon Metals

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.

Blue Moon Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Resources and Blue Moon

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

The idea behind Lake Resources NL and Blue Moon Metals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.