Correlation Between Lynas Rare and Metals X

Can any of the company-specific risk be diversified away by investing in both Lynas Rare and Metals X 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 Metals X 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 Metals X Limited, you can compare the effects of market volatilities on Lynas Rare and Metals X 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 Metals X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lynas Rare and Metals X.

Diversification Opportunities for Lynas Rare and Metals X

0.73

Correlation Coefficient

Lynas Rare  Metals X

Poor diversification

The 3 months correlation between Lynas and Metals is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Lynas Rare i.e., Lynas Rare and Metals X go up and down completely randomly.

Pair Corralation between Lynas Rare and Metals X

Assuming the 90 days horizon Lynas Rare is expected to generate 206.65 times less return on investment than Metals X. But when comparing it to its historical volatility, Lynas Rare Earths is 2.66 times less risky than Metals X. It trades about 0.0 of its potential returns per unit of risk. Metals X Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Metals X Limited on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Metals X Limited or generate 13.04% return on investment over 90 days.

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

Lynas Rare Earths  vs.  Metals X Limited

Lynas Rare Earths

Risk-Adjusted Performance

0 of 100

Very Weak

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

Metals X Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Metals X reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lynas Rare and Metals X

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

The idea behind Lynas Rare Earths and Metals X Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.