Correlation Between CANADA RARE and Pembina Pipeline

Can any of the company-specific risk be diversified away by investing in both CANADA RARE and Pembina Pipeline 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 CANADA RARE and Pembina Pipeline into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CANADA RARE EARTH and Pembina Pipeline Corp, you can compare the effects of market volatilities on CANADA RARE and Pembina Pipeline 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 CANADA RARE with a short position of Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of CANADA RARE and Pembina Pipeline.

Diversification Opportunities for CANADA RARE and Pembina Pipeline

-0.05

Correlation Coefficient

CANADA RARE  Pembina Pipeline

Good diversification

The 3 months correlation between CANADA and Pembina is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CANADA RARE EARTH and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and CANADA 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 CANADA RARE EARTH are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of CANADA RARE i.e., CANADA RARE and Pembina Pipeline go up and down completely randomly.

Pair Corralation between CANADA RARE and Pembina Pipeline

Assuming the 90 days trading horizon CANADA RARE EARTH is expected to generate 63.79 times more return on investment than Pembina Pipeline. However, CANADA RARE is 63.79 times more volatile than Pembina Pipeline Corp. It trades about 0.25 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.08 per unit of risk. If you would invest  0.50  in CANADA RARE EARTH on September 5, 2024 and sell it today you would earn a total of  0.35  from holding CANADA RARE EARTH or generate 70.0% return on investment over 90 days.

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

CANADA RARE EARTH  vs.  Pembina Pipeline Corp

CANADA RARE EARTH

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CANADA RARE EARTH are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CANADA RARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CANADA RARE and Pembina Pipeline

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

The idea behind CANADA RARE EARTH and Pembina Pipeline Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.