Correlation Between Lynas Rare and Filo Mining

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

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

Diversification Opportunities for Lynas Rare and Filo Mining

-0.65

Correlation Coefficient

Lynas Rare  Filo Mining

Excellent diversification

The 3 months correlation between Lynas and Filo is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Filo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filo Mining Corp and Lynas 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 Lynas Rare Earths are associated (or correlated) with Filo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filo Mining Corp has no effect on the direction of Lynas Rare i.e., Lynas Rare and Filo Mining go up and down completely randomly.

Pair Corralation between Lynas Rare and Filo Mining

Assuming the 90 days horizon Lynas Rare Earths is expected to generate 3.24 times more return on investment than Filo Mining. However, Lynas Rare is 3.24 times more volatile than Filo Mining Corp. It trades about 0.1 of its potential returns per unit of risk. Filo Mining Corp is currently generating about -0.08 per unit of risk. If you would invest  397.00  in Lynas Rare Earths on December 28, 2024 and sell it today you would earn a total of  58.00  from holding Lynas Rare Earths or generate 14.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	23.33%
Values	Daily Returns

Lynas Rare Earths  vs.  Filo Mining Corp

Lynas Rare Earths

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lynas Rare Earths are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lynas Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Filo Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Filo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Filo Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lynas Rare and Filo Mining

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

The idea behind Lynas Rare Earths and Filo Mining Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.