Correlation Between Rare Element and Metals X
Can any of the company-specific risk be diversified away by investing in both Rare Element and Metals X 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 Metals X 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 Metals X Limited, you can compare the effects of market volatilities on Rare Element and Metals X 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 Metals X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rare Element and Metals X.
Diversification Opportunities for Rare Element and Metals X
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rare and Metals is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rare Element Resources and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Rare Element i.e., Rare Element and Metals X go up and down completely randomly.
Pair Corralation between Rare Element and Metals X
Assuming the 90 days horizon Rare Element Resources is expected to generate 1.19 times more return on investment than Metals X. However, Rare Element is 1.19 times more volatile than Metals X Limited. It trades about 0.09 of its potential returns per unit of risk. Metals X Limited is currently generating about 0.04 per unit of risk. If you would invest 38.00 in Rare Element Resources on October 25, 2024 and sell it today you would earn a total of 25.00 from holding Rare Element Resources or generate 65.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 23.89% |
| Values | Daily Returns |
Rare Element Resources vs. Metals X Limited
Performance |
| Timeline |
| Rare Element Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Metals X Limited |
Rare Element and Metals X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rare Element and Metals X
The main advantage of trading using opposite Rare Element and Metals X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rare Element position performs unexpectedly, Metals X 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 Metals X will offset losses from the drop in Metals X'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 |
| Metals X vs. Eramet SA ADR | Metals X vs. NGEx Minerals | Metals X vs. Forum Energy Metals | Metals X vs. Adriatic Metals Plc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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