Correlation Between Canada Rare and Wealth Minerals

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

Diversification Opportunities for Canada Rare and Wealth Minerals

-0.35

Correlation Coefficient

Canada Rare  Wealth Minerals

Very good diversification

The 3 months correlation between Canada and Wealth is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and Wealth Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealth Minerals 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 Wealth Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealth Minerals has no effect on the direction of Canada Rare i.e., Canada Rare and Wealth Minerals go up and down completely randomly.

Pair Corralation between Canada Rare and Wealth Minerals

Assuming the 90 days horizon Canada Rare Earth is expected to generate 3.74 times more return on investment than Wealth Minerals. However, Canada Rare is 3.74 times more volatile than Wealth Minerals. It trades about 0.1 of its potential returns per unit of risk. Wealth Minerals is currently generating about -0.04 per unit of risk. If you would invest  4.00  in Canada Rare Earth on October 24, 2024 and sell it today you would lose (3.00) from holding Canada Rare Earth or give up 75.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.76%
Values	Daily Returns

Canada Rare Earth  vs.  Wealth Minerals

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.

Wealth Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Canada Rare Earth and Wealth Minerals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.