Correlation Between Search Minerals and Lynas Rare
Can any of the company-specific risk be diversified away by investing in both Search Minerals 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 Search Minerals and Lynas Rare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Search Minerals and Lynas Rare Earths, you can compare the effects of market volatilities on Search Minerals 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 Search Minerals with a short position of Lynas Rare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Search Minerals and Lynas Rare.
Diversification Opportunities for Search Minerals and Lynas Rare
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Search and Lynas is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Search Minerals 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 Search Minerals 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 Search Minerals 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 Search Minerals i.e., Search Minerals and Lynas Rare go up and down completely randomly.
Pair Corralation between Search Minerals and Lynas Rare
Assuming the 90 days horizon Search Minerals is expected to generate 23.11 times more return on investment than Lynas Rare. However, Search Minerals is 23.11 times more volatile than Lynas Rare Earths. It trades about 0.08 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 2.40 in Search Minerals on August 29, 2024 and sell it today you would lose (1.20) from holding Search Minerals or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Search Minerals vs. Lynas Rare Earths
Performance |
| Timeline |
| Search Minerals |
| Lynas Rare Earths |
Search Minerals and Lynas Rare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Search Minerals and Lynas Rare
The main advantage of trading using opposite Search Minerals and Lynas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Search Minerals 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.| Search Minerals vs. Silver Hammer Mining | Search Minerals vs. Reyna Silver Corp | Search Minerals vs. Guanajuato Silver | Search Minerals vs. Silver One 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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