Correlation Between CDN Maverick and Texas Rare

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

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

Diversification Opportunities for CDN Maverick and Texas Rare

0.55

Correlation Coefficient

CDN Maverick  Texas Rare

Very weak diversification

The 3 months correlation between CDN and Texas is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CDN Maverick Capital 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 CDN Maverick 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 CDN Maverick Capital 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 CDN Maverick i.e., CDN Maverick and Texas Rare go up and down completely randomly.

Pair Corralation between CDN Maverick and Texas Rare

Assuming the 90 days horizon CDN Maverick is expected to generate 1.09 times less return on investment than Texas Rare. In addition to that, CDN Maverick is 1.54 times more volatile than Texas Rare Earth. It trades about 0.1 of its total potential returns per unit of risk. Texas Rare Earth is currently generating about 0.16 per unit of volatility. If you would invest  27.00  in Texas Rare Earth on December 27, 2024 and sell it today you would earn a total of  23.00  from holding Texas Rare Earth or generate 85.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

CDN Maverick Capital  vs.  Texas Rare Earth

CDN Maverick Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDN Maverick Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CDN Maverick reported solid returns over the last few months and may actually be approaching a breakup point.

Texas Rare Earth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Rare Earth are ranked lower than 12 (%) 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 CDN Maverick and Texas Rare

The main advantage of trading using opposite CDN Maverick and Texas Rare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN Maverick 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 CDN Maverick Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.