Correlation Between Cruz Cobalt and Lake Resources

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

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

Diversification Opportunities for Cruz Cobalt and Lake Resources

-0.28

Correlation Coefficient

Cruz Cobalt  Lake Resources

Very good diversification

The 3 months correlation between Cruz and Lake is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cruz Cobalt Corp 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 Cruz Cobalt 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 Cruz Cobalt Corp 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 Cruz Cobalt i.e., Cruz Cobalt and Lake Resources go up and down completely randomly.

Pair Corralation between Cruz Cobalt and Lake Resources

Assuming the 90 days horizon Cruz Cobalt Corp is expected to generate 1.03 times more return on investment than Lake Resources. However, Cruz Cobalt is 1.03 times more volatile than Lake Resources NL. It trades about 0.12 of its potential returns per unit of risk. Lake Resources NL is currently generating about -0.1 per unit of risk. If you would invest  2.22  in Cruz Cobalt Corp on March 4, 2024 and sell it today you would earn a total of  0.97  from holding Cruz Cobalt Corp or generate 43.69% return on investment over 90 days.

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

Cruz Cobalt Corp  vs.  Lake Resources NL

Cruz Cobalt Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cruz Cobalt Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cruz Cobalt reported solid returns over the last few months and may actually be approaching a breakup point.

Lake Resources NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Resources NL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cruz Cobalt and Lake Resources

The main advantage of trading using opposite Cruz Cobalt and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cruz Cobalt 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 Cruz Cobalt Corp 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.