Correlation Between Aclara Resources and Texas Rare

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

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

Diversification Opportunities for Aclara Resources and Texas Rare

0.01

Correlation Coefficient

Aclara Resources  Texas Rare

Significant diversification

The 3 months correlation between Aclara and Texas is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Aclara Resources and Texas Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Rare Earth and Aclara 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 Aclara Resources are associated (or correlated) with Texas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Rare Earth has no effect on the direction of Aclara Resources i.e., Aclara Resources and Texas Rare go up and down completely randomly.

Pair Corralation between Aclara Resources and Texas Rare

Assuming the 90 days horizon Aclara Resources is expected to under-perform the Texas Rare. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aclara Resources is 1.79 times less risky than Texas Rare. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Texas Rare Earth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Texas Rare Earth on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Texas Rare Earth or generate 13.79% return on investment over 90 days.

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

Aclara Resources  vs.  Texas Rare Earth

Aclara Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aclara Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Texas Rare Earth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Rare Earth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Texas Rare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aclara Resources and Texas Rare

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

The idea behind Aclara Resources and Texas Rare Earth 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.