Correlation Between China Rare and Edison Cobalt
Can any of the company-specific risk be diversified away by investing in both China Rare and Edison Cobalt 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 China Rare and Edison Cobalt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Rare Earth and Edison Cobalt Corp, you can compare the effects of market volatilities on China Rare and Edison Cobalt 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 China Rare with a short position of Edison Cobalt. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Rare and Edison Cobalt.
Diversification Opportunities for China Rare and Edison Cobalt
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Edison is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Rare Earth and Edison Cobalt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison Cobalt Corp and China 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 China Rare Earth are associated (or correlated) with Edison Cobalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison Cobalt Corp has no effect on the direction of China Rare i.e., China Rare and Edison Cobalt go up and down completely randomly.
Pair Corralation between China Rare and Edison Cobalt
Assuming the 90 days horizon China Rare Earth is expected to generate 2.44 times more return on investment than Edison Cobalt. However, China Rare is 2.44 times more volatile than Edison Cobalt Corp. It trades about 0.1 of its potential returns per unit of risk. Edison Cobalt Corp is currently generating about 0.01 per unit of risk. If you would invest 3.00 in China Rare Earth on August 28, 2024 and sell it today you would earn a total of 2.00 from holding China Rare Earth or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Rare Earth vs. Edison Cobalt Corp
Performance |
| Timeline |
| China Rare Earth |
| Edison Cobalt Corp |
China Rare and Edison Cobalt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Rare and Edison Cobalt
The main advantage of trading using opposite China Rare and Edison Cobalt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Rare position performs unexpectedly, Edison Cobalt 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 Edison Cobalt will offset losses from the drop in Edison Cobalt's long position.| China Rare vs. Edison Cobalt Corp | China Rare vs. Baroyeca Gold Silver | China Rare vs. Aurelia Metals Limited | China Rare vs. Champion Bear Resources |
| Edison Cobalt vs. Baroyeca Gold Silver | Edison Cobalt vs. Aurelia Metals Limited | Edison Cobalt vs. China Rare Earth | Edison Cobalt 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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