Correlation Between American Rare and Amarc Resources
Can any of the company-specific risk be diversified away by investing in both American Rare and Amarc 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 American Rare and Amarc Resources 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 Amarc Resources, you can compare the effects of market volatilities on American Rare and Amarc 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 American Rare with a short position of Amarc Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Amarc Resources.
Diversification Opportunities for American Rare and Amarc Resources
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Amarc is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Amarc Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarc Resources 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 Amarc Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarc Resources has no effect on the direction of American Rare i.e., American Rare and Amarc Resources go up and down completely randomly.
Pair Corralation between American Rare and Amarc Resources
Assuming the 90 days horizon American Rare Earths is expected to generate 1.33 times more return on investment than Amarc Resources. However, American Rare is 1.33 times more volatile than Amarc Resources. It trades about 0.05 of its potential returns per unit of risk. Amarc Resources is currently generating about 0.05 per unit of risk. If you would invest 14.00 in American Rare Earths on August 29, 2024 and sell it today you would earn a total of 5.00 from holding American Rare Earths or generate 35.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Rare Earths vs. Amarc Resources
Performance |
| Timeline |
| American Rare Earths |
| Amarc Resources |
American Rare and Amarc Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Rare and Amarc Resources
The main advantage of trading using opposite American Rare and Amarc Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Amarc 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 Amarc Resources will offset losses from the drop in Amarc Resources' long position.The idea behind American Rare Earths and Amarc Resources 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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