Correlation Between Lynas Rare and Azimut Exploration

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

Diversification Opportunities for Lynas Rare and Azimut Exploration

0.17

Correlation Coefficient

Lynas Rare  Azimut Exploration

Average diversification

The 3 months correlation between Lynas and Azimut is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Azimut Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azimut Exploration 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 Azimut Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azimut Exploration has no effect on the direction of Lynas Rare i.e., Lynas Rare and Azimut Exploration go up and down completely randomly.

Pair Corralation between Lynas Rare and Azimut Exploration

Assuming the 90 days horizon Lynas Rare Earths is expected to under-perform the Azimut Exploration. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lynas Rare Earths is 3.17 times less risky than Azimut Exploration. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Azimut Exploration is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Azimut Exploration on September 3, 2024 and sell it today you would earn a total of  8.00  from holding Azimut Exploration or generate 21.05% return on investment over 90 days.

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

Lynas Rare Earths  vs.  Azimut Exploration

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.

Azimut Exploration

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Azimut Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Azimut Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lynas Rare and Azimut Exploration

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

The idea behind Lynas Rare Earths and Azimut Exploration 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.