Correlation Between Critical Elements and Jervois Mining

Can any of the company-specific risk be diversified away by investing in both Critical Elements and Jervois Mining 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 Critical Elements and Jervois Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Critical Elements and Jervois Mining, you can compare the effects of market volatilities on Critical Elements and Jervois Mining 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 Critical Elements with a short position of Jervois Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Elements and Jervois Mining.

Diversification Opportunities for Critical Elements and Jervois Mining

0.6

Correlation Coefficient

Critical Elements  Jervois Mining

Poor diversification

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

Pair Corralation between Critical Elements and Jervois Mining

Assuming the 90 days horizon Critical Elements is expected to generate 0.53 times more return on investment than Jervois Mining. However, Critical Elements is 1.88 times less risky than Jervois Mining. It trades about -0.06 of its potential returns per unit of risk. Jervois Mining is currently generating about -0.04 per unit of risk. If you would invest  155.00  in Critical Elements on September 14, 2024 and sell it today you would lose (129.00) from holding Critical Elements or give up 83.23% of portfolio value over 90 days.

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

Critical Elements  vs.  Jervois Mining

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jervois Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jervois Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Jervois Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Elements and Jervois Mining

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

The idea behind Critical Elements and Jervois Mining 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.