Correlation Between Collins Foods and Lynas Rare
Can any of the company-specific risk be diversified away by investing in both Collins Foods and Lynas Rare 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 Collins Foods and Lynas Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods and Lynas Rare Earths, you can compare the effects of market volatilities on Collins Foods and Lynas Rare 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 Collins Foods with a short position of Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and Lynas Rare.
Diversification Opportunities for Collins Foods and Lynas Rare
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Collins and Lynas is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths and Collins Foods 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 Collins Foods are associated (or correlated) with Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Collins Foods i.e., Collins Foods and Lynas Rare go up and down completely randomly.
Pair Corralation between Collins Foods and Lynas Rare
Assuming the 90 days trading horizon Collins Foods is expected to generate 0.56 times more return on investment than Lynas Rare. However, Collins Foods is 1.77 times less risky than Lynas Rare. It trades about -0.27 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about -0.25 per unit of risk. If you would invest 839.00 in Collins Foods on September 13, 2024 and sell it today you would lose (52.00) from holding Collins Foods or give up 6.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods vs. Lynas Rare Earths
Performance |
| Timeline |
| Collins Foods |
| Lynas Rare Earths |
Collins Foods and Lynas Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and Lynas Rare
The main advantage of trading using opposite Collins Foods and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, Lynas Rare 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 Lynas Rare will offset losses from the drop in Lynas Rare's long position.| Collins Foods vs. Energy Resources | Collins Foods vs. 88 Energy | Collins Foods vs. Amani Gold | Collins Foods vs. A1 Investments Resources |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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