Correlation Between American Rare and Atco Mining
Can any of the company-specific risk be diversified away by investing in both American Rare and Atco Mining 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 American Rare and Atco Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Rare Earths and Atco Mining, you can compare the effects of market volatilities on American Rare and Atco Mining 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 American Rare with a short position of Atco Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Atco Mining.
Diversification Opportunities for American Rare and Atco Mining
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Atco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Atco Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco Mining and American Rare 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 American Rare Earths are associated (or correlated) with Atco Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco Mining has no effect on the direction of American Rare i.e., American Rare and Atco Mining go up and down completely randomly.
Pair Corralation between American Rare and Atco Mining
Assuming the 90 days horizon American Rare is expected to generate 1.52 times less return on investment than Atco Mining. But when comparing it to its historical volatility, American Rare Earths is 1.96 times less risky than Atco Mining. It trades about 0.07 of its potential returns per unit of risk. Atco Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Atco Mining on August 25, 2024 and sell it today you would lose (2.52) from holding Atco Mining or give up 63.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Rare Earths vs. Atco Mining
Performance |
| Timeline |
| American Rare Earths |
| Atco Mining |
American Rare and Atco Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Rare and Atco Mining
The main advantage of trading using opposite American Rare and Atco Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Atco Mining 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 Atco Mining will offset losses from the drop in Atco Mining's long position.| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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