Correlation Between MP Materials and EMX Royalty

Can any of the company-specific risk be diversified away by investing in both MP Materials and EMX Royalty 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 EMX Royalty 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 EMX Royalty Corp, you can compare the effects of market volatilities on MP Materials and EMX Royalty 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 EMX Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of MP Materials and EMX Royalty.

Diversification Opportunities for MP Materials and EMX Royalty

-0.19

Correlation Coefficient

MP Materials  EMX Royalty

Good diversification

The 3 months correlation between MP Materials and EMX is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and EMX Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMX Royalty Corp 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 EMX Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMX Royalty Corp has no effect on the direction of MP Materials i.e., MP Materials and EMX Royalty go up and down completely randomly.

Pair Corralation between MP Materials and EMX Royalty

Allowing for the 90-day total investment horizon MP Materials Corp is expected to generate 2.85 times more return on investment than EMX Royalty. However, MP Materials is 2.85 times more volatile than EMX Royalty Corp. It trades about 0.04 of its potential returns per unit of risk. EMX Royalty Corp is currently generating about 0.1 per unit of risk. 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	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MP Materials Corp  vs.  EMX Royalty Corp

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.

EMX Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMX Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, EMX Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MP Materials and EMX Royalty

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

The idea behind MP Materials Corp and EMX Royalty Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.