Correlation Between Edison Cobalt and China Rare
Can any of the company-specific risk be diversified away by investing in both Edison Cobalt and China 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 Edison Cobalt and China Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison Cobalt Corp and China Rare Earth, you can compare the effects of market volatilities on Edison Cobalt and China 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 Edison Cobalt with a short position of China Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison Cobalt and China Rare.
Diversification Opportunities for Edison Cobalt and China Rare
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Edison and China is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Edison Cobalt Corp and China Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Rare Earth and Edison Cobalt 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 Edison Cobalt Corp are associated (or correlated) with China Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Rare Earth has no effect on the direction of Edison Cobalt i.e., Edison Cobalt and China Rare go up and down completely randomly.
Pair Corralation between Edison Cobalt and China Rare
Assuming the 90 days horizon Edison Cobalt Corp is expected to under-perform the China Rare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Edison Cobalt Corp is 1.07 times less risky than China Rare. The pink sheet trades about -0.28 of its potential returns per unit of risk. The China Rare Earth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.00 in China Rare Earth on August 26, 2024 and sell it today you would earn a total of 0.00 from holding China Rare Earth or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edison Cobalt Corp vs. China Rare Earth
Performance |
| Timeline |
| Edison Cobalt Corp |
| China Rare Earth |
Edison Cobalt and China Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison Cobalt and China Rare
The main advantage of trading using opposite Edison Cobalt and China Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison Cobalt position performs unexpectedly, China 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 China Rare will offset losses from the drop in China Rare's long position.The idea behind Edison Cobalt Corp and China Rare Earth 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.| China Rare vs. Edison Cobalt Corp | China Rare vs. Baroyeca Gold Silver | China Rare vs. Aurelia Metals Limited | China Rare 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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