Correlation Between Green Technology and American Rare
Can any of the company-specific risk be diversified away by investing in both Green Technology and American 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 Green Technology and American Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Green Technology Metals and American Rare Earths, you can compare the effects of market volatilities on Green Technology and American 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 Green Technology with a short position of American Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Technology and American Rare.
Diversification Opportunities for Green Technology and American Rare
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Green and American is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Green Technology Metals and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths and Green Technology 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 Green Technology Metals are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of Green Technology i.e., Green Technology and American Rare go up and down completely randomly.
Pair Corralation between Green Technology and American Rare
Assuming the 90 days horizon Green Technology is expected to generate 1.18 times less return on investment than American Rare. In addition to that, Green Technology is 2.28 times more volatile than American Rare Earths. It trades about 0.03 of its total potential returns per unit of risk. American Rare Earths is currently generating about 0.07 per unit of volatility. 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 | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Green Technology Metals vs. American Rare Earths
Performance |
| Timeline |
| Green Technology Metals |
| American Rare Earths |
Green Technology and American Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Green Technology and American Rare
The main advantage of trading using opposite Green Technology and American Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Technology position performs unexpectedly, American 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 American Rare will offset losses from the drop in American Rare's long position.| Green Technology vs. Lake Resources NL | Green Technology vs. Arizona Lithium Limited | Green Technology vs. Sayona Mining Limited | Green Technology vs. Argosy Minerals Limited |
| American Rare vs. Aurelia Metals Limited | American Rare vs. Artemis Resources | American Rare vs. Ascendant Resources | American Rare vs. Azimut Exploration |
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 Stocks Directory module to find actively traded stocks across global markets.
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