Correlation Between China Molybdenum and American Rare

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

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

Diversification Opportunities for China Molybdenum and American Rare

0.73

Correlation Coefficient

China Molybdenum  American Rare

Poor diversification

The 3 months correlation between China and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and American Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Rare Earths and China Molybdenum 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 China Molybdenum Co are associated (or correlated) with American Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Rare Earths has no effect on the direction of China Molybdenum i.e., China Molybdenum and American Rare go up and down completely randomly.

Pair Corralation between China Molybdenum and American Rare

Assuming the 90 days horizon China Molybdenum Co is expected to under-perform the American Rare. In addition to that, China Molybdenum is 1.72 times more volatile than American Rare Earths. It trades about -0.06 of its total potential returns per unit of risk. American Rare Earths is currently generating about -0.08 per unit of volatility. If you would invest  19.00  in American Rare Earths on October 1, 2024 and sell it today you would lose (1.00) from holding American Rare Earths or give up 5.26% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  American Rare Earths

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co 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 essential 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.

American Rare Earths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Rare Earths 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 China Molybdenum and American Rare

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

The idea behind China Molybdenum Co and American 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.