Correlation Between Lynas Rare and Ucore Rare

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

Diversification Opportunities for Lynas Rare and Ucore Rare

-0.47

Correlation Coefficient

Lynas Rare  Ucore Rare

Very good diversification

The 3 months correlation between Lynas and Ucore is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Ucore Rare Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ucore Rare 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 Ucore Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ucore Rare Metals has no effect on the direction of Lynas Rare i.e., Lynas Rare and Ucore Rare go up and down completely randomly.

Pair Corralation between Lynas Rare and Ucore Rare

Assuming the 90 days horizon Lynas Rare Earths is expected to generate 0.59 times more return on investment than Ucore Rare. However, Lynas Rare Earths is 1.71 times less risky than Ucore Rare. It trades about 0.0 of its potential returns per unit of risk. Ucore Rare Metals is currently generating about 0.0 per unit of risk. If you would invest  450.00  in Lynas Rare Earths on August 31, 2024 and sell it today you would lose (7.00) from holding Lynas Rare Earths or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Lynas Rare Earths  vs.  Ucore Rare Metals

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.

Ucore Rare Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ucore Rare Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ucore Rare 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 Ucore Rare

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

The idea behind Lynas Rare Earths and Ucore Rare Metals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.