Correlation Between Texas Rare and Adriatic Metals

Can any of the company-specific risk be diversified away by investing in both Texas Rare and Adriatic Metals 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 Texas Rare and Adriatic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Texas Rare Earth and Adriatic Metals Plc, you can compare the effects of market volatilities on Texas Rare and Adriatic Metals 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 Texas Rare with a short position of Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Rare and Adriatic Metals.

Diversification Opportunities for Texas Rare and Adriatic Metals

-0.63

Correlation Coefficient

Texas Rare  Adriatic Metals

Excellent diversification

The 3 months correlation between Texas and Adriatic is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Texas Rare Earth and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc and Texas 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 Texas Rare Earth are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of Texas Rare i.e., Texas Rare and Adriatic Metals go up and down completely randomly.

Pair Corralation between Texas Rare and Adriatic Metals

Given the investment horizon of 90 days Texas Rare Earth is expected to under-perform the Adriatic Metals. In addition to that, Texas Rare is 1.34 times more volatile than Adriatic Metals Plc. It trades about 0.0 of its total potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.01 per unit of volatility. If you would invest  299.00  in Adriatic Metals Plc on September 3, 2024 and sell it today you would lose (17.00) from holding Adriatic Metals Plc or give up 5.69% of portfolio value over 90 days.

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

Texas Rare Earth  vs.  Adriatic Metals Plc

Texas Rare Earth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Rare Earth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Texas Rare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Adriatic Metals Plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Rare and Adriatic Metals

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

The idea behind Texas Rare Earth and Adriatic Metals Plc 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.