Correlation Between MP Materials and Aris Mining

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

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

Diversification Opportunities for MP Materials and Aris Mining

-0.62

Correlation Coefficient

MP Materials  Aris Mining

Excellent diversification

The 3 months correlation between MP Materials and Aris is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining and MP Materials 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 MP Materials Corp are associated (or correlated) with Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of MP Materials i.e., MP Materials and Aris Mining go up and down completely randomly.

Pair Corralation between MP Materials and Aris Mining

Allowing for the 90-day total investment horizon MP Materials Corp is expected to generate 1.26 times more return on investment than Aris Mining. However, MP Materials is 1.26 times more volatile than Aris Mining. It trades about 0.16 of its potential returns per unit of risk. Aris Mining is currently generating about -0.05 per unit of risk. If you would invest  1,379  in MP Materials Corp on September 12, 2024 and sell it today you would earn a total of  566.00  from holding MP Materials Corp or generate 41.04% return on investment over 90 days.

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

MP Materials Corp  vs.  Aris Mining

MP Materials Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MP Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Aris Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aris Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MP Materials and Aris Mining

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

The idea behind MP Materials Corp and Aris Mining 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.