Correlation Between Zacapa Resources and Lynas Rare

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

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

Diversification Opportunities for Zacapa Resources and Lynas Rare

0.6

Correlation Coefficient

Zacapa Resources  Lynas Rare

Poor diversification

The 3 months correlation between Zacapa and Lynas is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zacapa Resources and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths and Zacapa Resources 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 Zacapa Resources are associated (or correlated) with Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Zacapa Resources i.e., Zacapa Resources and Lynas Rare go up and down completely randomly.

Pair Corralation between Zacapa Resources and Lynas Rare

If you would invest  386.00  in Lynas Rare Earths on October 12, 2024 and sell it today you would earn a total of  43.00  from holding Lynas Rare Earths or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.53%
Values	Daily Returns

Zacapa Resources  vs.  Lynas Rare Earths

Zacapa Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zacapa Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Zacapa Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lynas Rare Earths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lynas Rare Earths 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zacapa Resources and Lynas Rare

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

The idea behind Zacapa Resources and Lynas Rare Earths 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.