Correlation Between Lake Resources and Metals X

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

Diversification Opportunities for Lake Resources and Metals X

0.32

Correlation Coefficient

Lake Resources  Metals X

Weak diversification

The 3 months correlation between Lake and Metals is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Lake Resources i.e., Lake Resources and Metals X go up and down completely randomly.

Pair Corralation between Lake Resources and Metals X

Assuming the 90 days horizon Lake Resources NL is expected to under-perform the Metals X. In addition to that, Lake Resources is 1.22 times more volatile than Metals X Limited. It trades about -0.16 of its total potential returns per unit of risk. Metals X Limited is currently generating about -0.06 per unit of volatility. If you would invest  29.00  in Metals X Limited on September 22, 2024 and sell it today you would lose (6.00) from holding Metals X Limited or give up 20.69% of portfolio value over 90 days.

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

Lake Resources NL  vs.  Metals X Limited

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

Metals X Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals X Limited 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 technical and fundamental 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 Metals X

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

The idea behind Lake Resources NL and Metals X Limited 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.