Correlation Between American Rare and Aurelia Metals

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

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

Diversification Opportunities for American Rare and Aurelia Metals

0.19

Correlation Coefficient

American Rare  Aurelia Metals

Average diversification

The 3 months correlation between American and Aurelia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding American Rare Earths and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and American 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 American Rare Earths are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of American Rare i.e., American Rare and Aurelia Metals go up and down completely randomly.

Pair Corralation between American Rare and Aurelia Metals

Assuming the 90 days horizon American Rare Earths is expected to generate 0.27 times more return on investment than Aurelia Metals. However, American Rare Earths is 3.64 times less risky than Aurelia Metals. It trades about 0.1 of its potential returns per unit of risk. Aurelia Metals Limited is currently generating about -0.21 per unit of risk. If you would invest  17.00  in American Rare Earths on September 13, 2024 and sell it today you would earn a total of  1.00  from holding American Rare Earths or generate 5.88% return on investment over 90 days.

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

American Rare Earths  vs.  Aurelia Metals Limited

American Rare Earths

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aurelia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurelia Metals Limited 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.

Pair Trading with American Rare and Aurelia Metals

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

The idea behind American Rare Earths and Aurelia Metals Limited 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.