Correlation Between Optica Rare and VanEck Rare

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

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

Diversification Opportunities for Optica Rare and VanEck Rare

0.92

Correlation Coefficient

Optica Rare  VanEck Rare

Almost no diversification

The 3 months correlation between Optica and VanEck is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Optica Rare Earths and VanEck Rare EarthStrategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Rare EarthStr and Optica 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 Optica Rare Earths are associated (or correlated) with VanEck Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Rare EarthStr has no effect on the direction of Optica Rare i.e., Optica Rare and VanEck Rare go up and down completely randomly.

Pair Corralation between Optica Rare and VanEck Rare

Given the investment horizon of 90 days Optica Rare Earths is expected to under-perform the VanEck Rare. But the etf apears to be less risky and, when comparing its historical volatility, Optica Rare Earths is 1.05 times less risky than VanEck Rare. The etf trades about -0.29 of its potential returns per unit of risk. The VanEck Rare EarthStrategic is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  4,281  in VanEck Rare EarthStrategic on October 12, 2024 and sell it today you would lose (199.00) from holding VanEck Rare EarthStrategic or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Optica Rare Earths  vs.  VanEck Rare EarthStrategic

Optica Rare Earths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optica Rare Earths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

VanEck Rare EarthStr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Rare EarthStrategic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Optica Rare and VanEck Rare

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

The idea behind Optica Rare Earths and VanEck Rare EarthStrategic 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .