Correlation Between Canada Rare and Spearmint Resources

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

Diversification Opportunities for Canada Rare and Spearmint Resources

0.32

Correlation Coefficient

Canada Rare  Spearmint Resources

Weak diversification

The 3 months correlation between Canada and Spearmint is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and Spearmint Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spearmint Resources 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 Spearmint Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spearmint Resources has no effect on the direction of Canada Rare i.e., Canada Rare and Spearmint Resources go up and down completely randomly.

Pair Corralation between Canada Rare and Spearmint Resources

Assuming the 90 days horizon Canada Rare Earth is expected to under-perform the Spearmint Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Canada Rare Earth is 1.59 times less risky than Spearmint Resources. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Spearmint Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Spearmint Resources on December 21, 2024 and sell it today you would lose (0.51) from holding Spearmint Resources or give up 30.0% of portfolio value over 90 days.

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

Canada Rare Earth  vs.  Spearmint Resources

Canada Rare Earth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canada Rare Earth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Spearmint Resources

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Canada Rare Earth and Spearmint Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.