Correlation Between American Rare and Canadian Palladium
Can any of the company-specific risk be diversified away by investing in both American Rare and Canadian Palladium 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 Canadian Palladium 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 Canadian Palladium Resources, you can compare the effects of market volatilities on American Rare and Canadian Palladium 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 Canadian Palladium. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Canadian Palladium.
Diversification Opportunities for American Rare and Canadian Palladium
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Canadian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Canadian Palladium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Palladium 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 Canadian Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Palladium has no effect on the direction of American Rare i.e., American Rare and Canadian Palladium go up and down completely randomly.
Pair Corralation between American Rare and Canadian Palladium
Assuming the 90 days horizon American Rare Earths is expected to generate 0.31 times more return on investment than Canadian Palladium. However, American Rare Earths is 3.25 times less risky than Canadian Palladium. It trades about 0.1 of its potential returns per unit of risk. Canadian Palladium Resources is currently generating about -0.02 per unit of risk. If you would invest 18.00 in American Rare Earths on November 5, 2024 and sell it today you would earn a total of 1.00 from holding American Rare Earths or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
American Rare Earths vs. Canadian Palladium Resources
Performance |
| Timeline |
| American Rare Earths |
| Canadian Palladium |
American Rare and Canadian Palladium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Rare and Canadian Palladium
The main advantage of trading using opposite American Rare and Canadian Palladium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Canadian Palladium 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 Canadian Palladium will offset losses from the drop in Canadian Palladium's long position.| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
| Canadian Palladium vs. Aurelia Metals Limited | Canadian Palladium vs. Artemis Resources | Canadian Palladium vs. Azimut Exploration | Canadian Palladium vs. Champion Bear Resources |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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