Correlation Between MP Materials and Yield10 Bioscience

Can any of the company-specific risk be diversified away by investing in both MP Materials and Yield10 Bioscience 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 Yield10 Bioscience 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 Yield10 Bioscience, you can compare the effects of market volatilities on MP Materials and Yield10 Bioscience 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 Yield10 Bioscience. Check out your portfolio center. Please also check ongoing floating volatility patterns of MP Materials and Yield10 Bioscience.

Diversification Opportunities for MP Materials and Yield10 Bioscience

-0.76

Correlation Coefficient

MP Materials  Yield10 Bioscience

Pay attention - limited upside

The 3 months correlation between MP Materials and Yield10 is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Yield10 Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yield10 Bioscience 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 Yield10 Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yield10 Bioscience has no effect on the direction of MP Materials i.e., MP Materials and Yield10 Bioscience go up and down completely randomly.

Pair Corralation between MP Materials and Yield10 Bioscience

Allowing for the 90-day total investment horizon MP Materials Corp is expected to generate 3.91 times more return on investment than Yield10 Bioscience. However, MP Materials is 3.91 times more volatile than Yield10 Bioscience. It trades about 0.0 of its potential returns per unit of risk. Yield10 Bioscience is currently generating about -0.87 per unit of risk. If you would invest  2,414  in MP Materials Corp on September 12, 2024 and sell it today you would lose (460.00) from holding MP Materials Corp or give up 19.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.14%
Values	Daily Returns

MP Materials Corp  vs.  Yield10 Bioscience

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.

Yield10 Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yield10 Bioscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Yield10 Bioscience is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MP Materials and Yield10 Bioscience

The main advantage of trading using opposite MP Materials and Yield10 Bioscience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MP Materials position performs unexpectedly, Yield10 Bioscience 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 Yield10 Bioscience will offset losses from the drop in Yield10 Bioscience's long position.

The idea behind MP Materials Corp and Yield10 Bioscience 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.