Correlation Between CAT Strategic and Rare Element

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

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

Diversification Opportunities for CAT Strategic and Rare Element

0.43

Correlation Coefficient

CAT Strategic  Rare Element

Very weak diversification

The 3 months correlation between CAT and Rare is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CAT Strategic Metals and Rare Element Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rare Element Resources and CAT Strategic 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 CAT Strategic Metals are associated (or correlated) with Rare Element. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rare Element Resources has no effect on the direction of CAT Strategic i.e., CAT Strategic and Rare Element go up and down completely randomly.

Pair Corralation between CAT Strategic and Rare Element

If you would invest  0.80  in CAT Strategic Metals on September 13, 2024 and sell it today you would lose (0.40) from holding CAT Strategic Metals or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.4%
Values	Daily Returns

CAT Strategic Metals  vs.  Rare Element Resources

CAT Strategic Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAT Strategic Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Rare Element Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CAT Strategic and Rare Element

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

The idea behind CAT Strategic Metals and Rare Element 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 Transaction History module to view history of all your transactions and understand their impact on performance.