Correlation Between Ucore Rare and ADF

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

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

Diversification Opportunities for Ucore Rare and ADF

-0.22

Correlation Coefficient

Ucore Rare  ADF

Very good diversification

The 3 months correlation between Ucore and ADF is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ucore Rare Metals and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Ucore 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 Ucore Rare Metals are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Ucore Rare i.e., Ucore Rare and ADF go up and down completely randomly.

Pair Corralation between Ucore Rare and ADF

Assuming the 90 days horizon Ucore Rare Metals is expected to generate 1.05 times more return on investment than ADF. However, Ucore Rare is 1.05 times more volatile than ADF Group. It trades about 0.1 of its potential returns per unit of risk. ADF Group is currently generating about -0.08 per unit of risk. If you would invest  60.00  in Ucore Rare Metals on September 5, 2024 and sell it today you would earn a total of  15.00  from holding Ucore Rare Metals or generate 25.0% return on investment over 90 days.

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

Ucore Rare Metals  vs.  ADF Group

Ucore Rare Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ucore Rare Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ucore Rare showed solid returns over the last few months and may actually be approaching a breakup point.

ADF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ucore Rare and ADF

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

The idea behind Ucore Rare Metals and ADF Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.