Correlation Between Rare Element and CAT Strategic

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

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

Diversification Opportunities for Rare Element and CAT Strategic

0.43

Correlation Coefficient

Rare Element  CAT Strategic

Very weak diversification

The 3 months correlation between Rare and CAT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rare Element Resources and CAT Strategic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAT Strategic Metals and Rare Element 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 Rare Element Resources are associated (or correlated) with CAT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAT Strategic Metals has no effect on the direction of Rare Element i.e., Rare Element and CAT Strategic go up and down completely randomly.

Pair Corralation between Rare Element and CAT Strategic

If you would invest  0.80  in CAT Strategic Metals on September 13, 2024 and sell it today you would lose (0.40) from holding CAT Strategic Metals or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.4%
Values	Daily Returns

Rare Element Resources  vs.  CAT Strategic Metals

Rare Element Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

CAT Strategic Metals

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Rare Element and CAT Strategic

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

The idea behind Rare Element Resources and CAT Strategic Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.