Correlation Between American Rare and Tradeweb Markets

Can any of the company-specific risk be diversified away by investing in both American Rare and Tradeweb Markets 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 American Rare and Tradeweb Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Rare Earths and Tradeweb Markets, you can compare the effects of market volatilities on American Rare and Tradeweb Markets 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 American Rare with a short position of Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Rare and Tradeweb Markets.

Diversification Opportunities for American Rare and Tradeweb Markets

0.06

Correlation Coefficient

American Rare  Tradeweb Markets

Significant diversification

The 3 months correlation between American and Tradeweb is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets and American Rare 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 American Rare Earths are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of American Rare i.e., American Rare and Tradeweb Markets go up and down completely randomly.

Pair Corralation between American Rare and Tradeweb Markets

Assuming the 90 days horizon American Rare Earths is expected to generate 6.43 times more return on investment than Tradeweb Markets. However, American Rare is 6.43 times more volatile than Tradeweb Markets. It trades about 0.06 of its potential returns per unit of risk. Tradeweb Markets is currently generating about 0.12 per unit of risk. If you would invest  516.00  in American Rare Earths on September 12, 2024 and sell it today you would earn a total of  384.00  from holding American Rare Earths or generate 74.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

American Rare Earths  vs.  Tradeweb Markets

American Rare Earths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Rare Earths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, American Rare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tradeweb Markets

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Rare and Tradeweb Markets

The main advantage of trading using opposite American Rare and Tradeweb Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Rare position performs unexpectedly, Tradeweb Markets 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 Tradeweb Markets will offset losses from the drop in Tradeweb Markets' long position.

The idea behind American Rare Earths and Tradeweb Markets 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.