Correlation Between Atlas Corp and Texas Rare

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

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

Diversification Opportunities for Atlas Corp and Texas Rare

0.45

Correlation Coefficient

Atlas Corp  Texas Rare

Very weak diversification

The 3 months correlation between Atlas and Texas is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Corp and Texas Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Rare Earth and Atlas Corp 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 Atlas Corp are associated (or correlated) with Texas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Rare Earth has no effect on the direction of Atlas Corp i.e., Atlas Corp and Texas Rare go up and down completely randomly.

Pair Corralation between Atlas Corp and Texas Rare

Assuming the 90 days horizon Atlas Corp is expected to generate 40.9 times less return on investment than Texas Rare. But when comparing it to its historical volatility, Atlas Corp is 32.12 times less risky than Texas Rare. It trades about 0.09 of its potential returns per unit of risk. Texas Rare Earth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Texas Rare Earth on December 1, 2024 and sell it today you would earn a total of  13.00  from holding Texas Rare Earth or generate 52.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Atlas Corp  vs.  Texas Rare Earth

Atlas Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Atlas Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Texas Rare Earth

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Rare Earth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Texas Rare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Atlas Corp and Texas Rare

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

The idea behind Atlas Corp and Texas Rare Earth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.