Correlation Between Canada Rare and Patriot Battery

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

Diversification Opportunities for Canada Rare and Patriot Battery

-0.4

Correlation Coefficient

Canada Rare  Patriot Battery

Very good diversification

The 3 months correlation between Canada and Patriot is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and Patriot Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patriot Battery Metals 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 Patriot Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patriot Battery Metals has no effect on the direction of Canada Rare i.e., Canada Rare and Patriot Battery go up and down completely randomly.

Pair Corralation between Canada Rare and Patriot Battery

Assuming the 90 days horizon Canada Rare Earth is expected to under-perform the Patriot Battery. In addition to that, Canada Rare is 3.25 times more volatile than Patriot Battery Metals. It trades about -0.24 of its total potential returns per unit of risk. Patriot Battery Metals is currently generating about -0.03 per unit of volatility. If you would invest  248.00  in Patriot Battery Metals on October 24, 2024 and sell it today you would lose (8.00) from holding Patriot Battery Metals or give up 3.23% of portfolio value over 90 days.

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

Canada Rare Earth  vs.  Patriot Battery Metals

Canada Rare Earth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Rare Earth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Canada Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Patriot Battery Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patriot Battery Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Patriot Battery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canada Rare and Patriot Battery

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

The idea behind Canada Rare Earth and Patriot Battery 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.