Correlation Between Lynas Rare and Aurelia Metals

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

Diversification Opportunities for Lynas Rare and Aurelia Metals

0.07

Correlation Coefficient

Lynas Rare  Aurelia Metals

Significant diversification

The 3 months correlation between Lynas and Aurelia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals 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 Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Lynas Rare i.e., Lynas Rare and Aurelia Metals go up and down completely randomly.

Pair Corralation between Lynas Rare and Aurelia Metals

Assuming the 90 days horizon Lynas Rare Earths is expected to under-perform the Aurelia Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lynas Rare Earths is 1.5 times less risky than Aurelia Metals. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Aurelia Metals Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Aurelia Metals Limited on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Aurelia Metals Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Lynas Rare Earths  vs.  Aurelia Metals 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. In spite of fairly strong fundamental indicators, Lynas Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aurelia Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aurelia Metals 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 Aurelia Metals

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

The idea behind Lynas Rare Earths and Aurelia Metals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.