Correlation Between Ucore Rare and Decade Resources

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

Diversification Opportunities for Ucore Rare and Decade Resources

-0.07

Correlation Coefficient

Ucore Rare  Decade Resources

Good diversification

The 3 months correlation between Ucore and Decade is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ucore Rare Metals and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources 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 Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of Ucore Rare i.e., Ucore Rare and Decade Resources go up and down completely randomly.

Pair Corralation between Ucore Rare and Decade Resources

Assuming the 90 days horizon Ucore Rare is expected to generate 1.38 times less return on investment than Decade Resources. But when comparing it to its historical volatility, Ucore Rare Metals is 2.34 times less risky than Decade Resources. It trades about 0.18 of its potential returns per unit of risk. Decade Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.58  in Decade Resources on December 29, 2024 and sell it today you would earn a total of  0.86  from holding Decade Resources or generate 54.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ucore Rare Metals  vs.  Decade Resources

Ucore Rare Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ucore Rare Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ucore Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Decade Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Decade Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Decade Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ucore Rare and Decade Resources

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

The idea behind Ucore Rare Metals and Decade 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.