Correlation Between TMC The and MP Materials

Can any of the company-specific risk be diversified away by investing in both TMC The and MP Materials 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 TMC The and MP Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TMC the metals and MP Materials Corp, you can compare the effects of market volatilities on TMC The and MP Materials 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 TMC The with a short position of MP Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMC The and MP Materials.

Diversification Opportunities for TMC The and MP Materials

-0.26

Correlation Coefficient

TMC The  MP Materials

Very good diversification

The 3 months correlation between TMC and MP Materials is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding TMC the metals and MP Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MP Materials Corp and TMC The 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 TMC the metals are associated (or correlated) with MP Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MP Materials Corp has no effect on the direction of TMC The i.e., TMC The and MP Materials go up and down completely randomly.

Pair Corralation between TMC The and MP Materials

Considering the 90-day investment horizon TMC the metals is expected to generate 1.88 times more return on investment than MP Materials. However, TMC The is 1.88 times more volatile than MP Materials Corp. It trades about 0.3 of its potential returns per unit of risk. MP Materials Corp is currently generating about -0.13 per unit of risk. If you would invest  85.00  in TMC the metals on October 8, 2024 and sell it today you would earn a total of  40.00  from holding TMC the metals or generate 47.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

TMC the metals  vs.  MP Materials Corp

TMC the metals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TMC the metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, TMC The exhibited solid returns over the last few months and may actually be approaching a breakup point.

MP Materials Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MP Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TMC The and MP Materials

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

The idea behind TMC the metals and MP Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.