Correlation Between American Rare and Critical Elements
Can any of the company-specific risk be diversified away by investing in both American Rare and Critical Elements 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 Critical Elements 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 Critical Elements, you can compare the effects of market volatilities on American Rare and Critical Elements 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 Critical Elements. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Critical Elements.
Diversification Opportunities for American Rare and Critical Elements
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Critical is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements 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 Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of American Rare i.e., American Rare and Critical Elements go up and down completely randomly.
Pair Corralation between American Rare and Critical Elements
Assuming the 90 days horizon American Rare Earths is expected to generate 1.71 times more return on investment than Critical Elements. However, American Rare is 1.71 times more volatile than Critical Elements. It trades about 0.07 of its potential returns per unit of risk. Critical Elements is currently generating about -0.06 per unit of risk. If you would invest 8.75 in American Rare Earths on August 25, 2024 and sell it today you would earn a total of 9.25 from holding American Rare Earths or generate 105.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Rare Earths vs. Critical Elements
Performance |
| Timeline |
| American Rare Earths |
| Critical Elements |
American Rare and Critical Elements Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Rare and Critical Elements
The main advantage of trading using opposite American Rare and Critical Elements positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Critical Elements 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 Critical Elements will offset losses from the drop in Critical Elements' long position.| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
| Critical Elements vs. Ascendant Resources | Critical Elements vs. Cantex Mine Development | Critical Elements vs. Amarc Resources | Critical Elements vs. Sterling Metals Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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