Correlation Between MP Materials and Dana Resources

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

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

Diversification Opportunities for MP Materials and Dana Resources

0.0

Correlation Coefficient

MP Materials  Dana Resources

Pay attention - limited upside

The 3 months correlation between MP Materials and Dana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and Dana Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Resources and MP Materials 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 MP Materials Corp are associated (or correlated) with Dana Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Resources has no effect on the direction of MP Materials i.e., MP Materials and Dana Resources go up and down completely randomly.

Pair Corralation between MP Materials and Dana Resources

If you would invest  1,912  in MP Materials Corp on September 14, 2024 and sell it today you would earn a total of  33.00  from holding MP Materials Corp or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

MP Materials Corp  vs.  Dana Resources

MP Materials Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MP Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Dana Resources

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with MP Materials and Dana Resources

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

The idea behind MP Materials Corp and Dana 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.