Correlation Between Huntsman Exploration and Canada Rare

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

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

Diversification Opportunities for Huntsman Exploration and Canada Rare

-0.43

Correlation Coefficient

Huntsman Exploration  Canada Rare

Very good diversification

The 3 months correlation between Huntsman and Canada is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman Exploration and Canada Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Rare Earth and Huntsman Exploration 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 Huntsman Exploration are associated (or correlated) with Canada Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Rare Earth has no effect on the direction of Huntsman Exploration i.e., Huntsman Exploration and Canada Rare go up and down completely randomly.

Pair Corralation between Huntsman Exploration and Canada Rare

Assuming the 90 days horizon Huntsman Exploration is expected to generate 2.68 times more return on investment than Canada Rare. However, Huntsman Exploration is 2.68 times more volatile than Canada Rare Earth. It trades about 0.17 of its potential returns per unit of risk. Canada Rare Earth is currently generating about -0.13 per unit of risk. If you would invest  2.00  in Huntsman Exploration on December 21, 2024 and sell it today you would earn a total of  4.10  from holding Huntsman Exploration or generate 205.0% return on investment over 90 days.

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

Huntsman Exploration  vs.  Canada Rare Earth

Huntsman Exploration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huntsman Exploration are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Huntsman Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Canada Rare Earth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canada Rare Earth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Huntsman Exploration and Canada Rare

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

The idea behind Huntsman Exploration and Canada 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.