Correlation Between Lynas Rare and Aclara Resources

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

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

Diversification Opportunities for Lynas Rare and Aclara Resources

0.25

Correlation Coefficient

Lynas Rare  Aclara Resources

Modest diversification

The 3 months correlation between Lynas and Aclara is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lynas Rare Earths and Aclara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclara Resources and Lynas 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 Lynas Rare Earths are associated (or correlated) with Aclara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclara Resources has no effect on the direction of Lynas Rare i.e., Lynas Rare and Aclara Resources go up and down completely randomly.

Pair Corralation between Lynas Rare and Aclara Resources

Assuming the 90 days horizon Lynas Rare Earths is expected to under-perform the Aclara Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lynas Rare Earths is 2.1 times less risky than Aclara Resources. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Aclara Resources is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Aclara Resources on September 4, 2024 and sell it today you would lose (5.00) from holding Aclara Resources or give up 13.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Lynas Rare Earths  vs.  Aclara Resources

Lynas Rare Earths

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lynas Rare Earths are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Lynas Rare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lynas Rare and Aclara Resources

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

The idea behind Lynas Rare Earths and Aclara 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.