Correlation Between Green Technology and American Rare

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

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

Diversification Opportunities for Green Technology and American Rare

0.27

Correlation Coefficient

Green Technology  American Rare

Modest diversification

The 3 months correlation between Green and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Green Technology Metals and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths and Green Technology 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 Green Technology Metals are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of Green Technology i.e., Green Technology and American Rare go up and down completely randomly.

Pair Corralation between Green Technology and American Rare

Assuming the 90 days horizon Green Technology Metals is expected to under-perform the American Rare. In addition to that, Green Technology is 3.34 times more volatile than American Rare Earths. It trades about -0.05 of its total potential returns per unit of risk. American Rare Earths is currently generating about 0.07 per unit of volatility. If you would invest  17.00  in American Rare Earths on December 29, 2024 and sell it today you would earn a total of  2.00  from holding American Rare Earths or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Green Technology Metals  vs.  American Rare Earths

Green Technology Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Technology Metals 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 essential 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.

American Rare Earths

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Technology and American Rare

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

The idea behind Green Technology Metals and American Rare Earths 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.