Correlation Between Critical Elements and Mineral Res

Can any of the company-specific risk be diversified away by investing in both Critical Elements and Mineral Res 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 Critical Elements and Mineral Res into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Critical Elements and Mineral Res, you can compare the effects of market volatilities on Critical Elements and Mineral Res 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 Critical Elements with a short position of Mineral Res. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Mineral Res.

Diversification Opportunities for Critical Elements and Mineral Res

0.77

Correlation Coefficient

Critical Elements  Mineral Res

Poor diversification

The 3 months correlation between Critical and Mineral is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res and Critical Elements 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 Critical Elements are associated (or correlated) with Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of Critical Elements i.e., Critical Elements and Mineral Res go up and down completely randomly.

Pair Corralation between Critical Elements and Mineral Res

Assuming the 90 days horizon Critical Elements is expected to under-perform the Mineral Res. In addition to that, Critical Elements is 1.36 times more volatile than Mineral Res. It trades about -0.07 of its total potential returns per unit of risk. Mineral Res is currently generating about -0.04 per unit of volatility. If you would invest  6,104  in Mineral Res on October 22, 2024 and sell it today you would lose (3,793) from holding Mineral Res or give up 62.14% of portfolio value over 90 days.

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

Critical Elements  vs.  Mineral Res

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Critical Elements 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 fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Critical Elements and Mineral Res

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

The idea behind Critical Elements and Mineral Res 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.