Correlation Between Rare Element and Lynas Rare
Can any of the company-specific risk be diversified away by investing in both Rare Element 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 Rare Element and Lynas Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rare Element Resources and Lynas Rare Earths, you can compare the effects of market volatilities on Rare Element 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 Rare Element with a short position of Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rare Element and Lynas Rare.
Diversification Opportunities for Rare Element and Lynas Rare
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rare and Lynas is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rare Element Resources 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 Rare Element 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 Rare Element Resources 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 Rare Element i.e., Rare Element and Lynas Rare go up and down completely randomly.
Pair Corralation between Rare Element and Lynas Rare
Assuming the 90 days horizon Rare Element Resources is expected to generate 2.97 times more return on investment than Lynas Rare. However, Rare Element is 2.97 times more volatile than Lynas Rare Earths. It trades about 0.07 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about -0.01 per unit of risk. If you would invest 41.00 in Rare Element Resources on August 29, 2024 and sell it today you would earn a total of 22.00 from holding Rare Element Resources or generate 53.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.45% |
| Values | Daily Returns |
Rare Element Resources vs. Lynas Rare Earths
Performance |
| Timeline |
| Rare Element Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Lynas Rare Earths |
Rare Element and Lynas Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rare Element and Lynas Rare
The main advantage of trading using opposite Rare Element and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rare Element 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.| Rare Element vs. Ucore Rare Metals | Rare Element vs. Lynas Rare Earths | Rare Element vs. Search Minerals | Rare Element vs. Arafura Resources |
| Lynas Rare vs. Arafura Resources | Lynas Rare vs. Texas Rare Earth | Lynas Rare vs. Ucore Rare Metals | Lynas Rare vs. Lynas Rare Earths |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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